Correlation Between ADF Foods and Som Distilleries

Can any of the company-specific risk be diversified away by investing in both ADF Foods and Som Distilleries at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ADF Foods and Som Distilleries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ADF Foods Limited and Som Distilleries Breweries, you can compare the effects of market volatilities on ADF Foods and Som Distilleries and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ADF Foods with a short position of Som Distilleries. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF Foods and Som Distilleries.

Diversification Opportunities for ADF Foods and Som Distilleries

0.77

Correlation Coefficient

ADF Foods  Som Distilleries

Poor diversification

The 3 months correlation between ADF and Som is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and Som Distilleries Breweries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Som Distilleries Bre and ADF Foods is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ADF Foods Limited are associated (or correlated) with Som Distilleries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Som Distilleries Bre has no effect on the direction of ADF Foods i.e., ADF Foods and Som Distilleries go up and down completely randomly.

Pair Corralation between ADF Foods and Som Distilleries

Assuming the 90 days trading horizon ADF Foods is expected to generate 1.28 times less return on investment than Som Distilleries. But when comparing it to its historical volatility, ADF Foods Limited is 1.09 times less risky than Som Distilleries. It trades about 0.11 of its potential returns per unit of risk. Som Distilleries Breweries is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  12,820  in Som Distilleries Breweries on April 20, 2025 and sell it today you would earn a total of  3,206  from holding Som Distilleries Breweries or generate 25.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

ADF Foods Limited  vs.  Som Distilleries Breweries

ADF Foods Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ADF Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Som Distilleries Bre

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Som Distilleries Breweries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Som Distilleries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADF Foods and Som Distilleries

The main advantage of trading using opposite ADF Foods and Som Distilleries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF Foods position performs unexpectedly, Som Distilleries can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Som Distilleries will offset losses from the drop in Som Distilleries' long position.

The idea behind ADF Foods Limited and Som Distilleries Breweries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.