Correlation Between Advanced Energy and AFC Energy
Can any of the company-specific risk be diversified away by investing in both Advanced Energy and AFC Energy 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 Advanced Energy and AFC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Energy Industries and AFC Energy plc, you can compare the effects of market volatilities on Advanced Energy and AFC Energy 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 Advanced Energy with a short position of AFC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and AFC Energy.
Diversification Opportunities for Advanced Energy and AFC Energy
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Advanced and AFC is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries and AFC Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFC Energy plc and Advanced Energy 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 Advanced Energy Industries are associated (or correlated) with AFC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFC Energy plc has no effect on the direction of Advanced Energy i.e., Advanced Energy and AFC Energy go up and down completely randomly.
Pair Corralation between Advanced Energy and AFC Energy
Given the investment horizon of 90 days Advanced Energy is expected to generate 1.93 times less return on investment than AFC Energy. But when comparing it to its historical volatility, Advanced Energy Industries is 3.88 times less risky than AFC Energy. It trades about 0.17 of its potential returns per unit of risk. AFC Energy plc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 11.00 in AFC Energy plc on August 25, 2024 and sell it today you would earn a total of 1.00 from holding AFC Energy plc or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Advanced Energy Industries vs. AFC Energy plc
Performance |
| Timeline |
| Advanced Energy Indu |
| AFC Energy plc |
Advanced Energy and AFC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Energy and AFC Energy
The main advantage of trading using opposite Advanced Energy and AFC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy position performs unexpectedly, AFC Energy 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 AFC Energy will offset losses from the drop in AFC Energy's long position.| Advanced Energy vs. Teradyne | Advanced Energy vs. Ichor Holdings | Advanced Energy vs. Amtech Systems | Advanced Energy vs. Veeco Instruments |
| AFC Energy vs. FREYR Battery SA | AFC Energy vs. nVent Electric PLC | AFC Energy vs. Hubbell | AFC Energy vs. Advanced Energy Industries |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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