Correlation Between ADF Foods and Parag Milk

Can any of the company-specific risk be diversified away by investing in both ADF Foods and Parag Milk 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 Parag Milk 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 Parag Milk Foods, you can compare the effects of market volatilities on ADF Foods and Parag Milk 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 Parag Milk. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF Foods and Parag Milk.

Diversification Opportunities for ADF Foods and Parag Milk

0.5

Correlation Coefficient

ADF Foods  Parag Milk

Very weak diversification

The 3 months correlation between ADF and Parag is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and Parag Milk Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parag Milk Foods 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 Parag Milk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parag Milk Foods has no effect on the direction of ADF Foods i.e., ADF Foods and Parag Milk go up and down completely randomly.

Pair Corralation between ADF Foods and Parag Milk

Assuming the 90 days trading horizon ADF Foods is expected to generate 2.32 times less return on investment than Parag Milk. In addition to that, ADF Foods is 1.3 times more volatile than Parag Milk Foods. It trades about 0.05 of its total potential returns per unit of risk. Parag Milk Foods is currently generating about 0.14 per unit of volatility. If you would invest  19,541  in Parag Milk Foods on May 6, 2025 and sell it today you would earn a total of  4,338  from holding Parag Milk Foods or generate 22.2% return on investment over 90 days.

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

ADF Foods Limited  vs.  Parag Milk Foods

ADF Foods Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, ADF Foods may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Parag Milk Foods

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Parag Milk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADF Foods and Parag Milk

The main advantage of trading using opposite ADF Foods and Parag Milk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF Foods position performs unexpectedly, Parag Milk 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 Parag Milk will offset losses from the drop in Parag Milk's long position.

The idea behind ADF Foods Limited and Parag Milk Foods 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.