Correlation Between AFC Energy and Advanced Energy
Can any of the company-specific risk be diversified away by investing in both AFC Energy and Advanced 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 AFC Energy and Advanced Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AFC Energy plc and Advanced Energy Industries, you can compare the effects of market volatilities on AFC Energy and Advanced 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 AFC Energy with a short position of Advanced Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFC Energy and Advanced Energy.
Diversification Opportunities for AFC Energy and Advanced Energy
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between AFC and Advanced is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding AFC Energy plc and Advanced Energy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Indu and AFC 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 AFC Energy plc are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Indu has no effect on the direction of AFC Energy i.e., AFC Energy and Advanced Energy go up and down completely randomly.
Pair Corralation between AFC Energy and Advanced Energy
Assuming the 90 days horizon AFC Energy plc is expected to under-perform the Advanced Energy. In addition to that, AFC Energy is 2.43 times more volatile than Advanced Energy Industries. It trades about 0.0 of its total potential returns per unit of risk. Advanced Energy Industries is currently generating about 0.05 per unit of volatility. If you would invest 8,581 in Advanced Energy Industries on August 29, 2024 and sell it today you would earn a total of 3,140 from holding Advanced Energy Industries or generate 36.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AFC Energy plc vs. Advanced Energy Industries
Performance |
| Timeline |
| AFC Energy plc |
| Advanced Energy Indu |
AFC Energy and Advanced Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AFC Energy and Advanced Energy
The main advantage of trading using opposite AFC Energy and Advanced Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AFC Energy position performs unexpectedly, Advanced 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 Advanced Energy will offset losses from the drop in Advanced Energy's long position.| AFC Energy vs. Legrand SA ADR | AFC Energy vs. Loop Energy | AFC Energy vs. Sunrise New Energy | AFC Energy vs. Alfen NV |
| Advanced Energy vs. MKS Instruments | Advanced Energy vs. Axcelis Technologies | Advanced Energy vs. Entegris | Advanced Energy vs. Cohu Inc |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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