Correlation Between AFC Energy and Legrand SA
Can any of the company-specific risk be diversified away by investing in both AFC Energy and Legrand SA 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 Legrand SA 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 Legrand SA ADR, you can compare the effects of market volatilities on AFC Energy and Legrand SA 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 Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFC Energy and Legrand SA.
Diversification Opportunities for AFC Energy and Legrand SA
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between AFC and Legrand is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding AFC Energy plc and Legrand SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA ADR 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 Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA ADR has no effect on the direction of AFC Energy i.e., AFC Energy and Legrand SA go up and down completely randomly.
Pair Corralation between AFC Energy and Legrand SA
Assuming the 90 days horizon AFC Energy plc is expected to under-perform the Legrand SA. In addition to that, AFC Energy is 3.73 times more volatile than Legrand SA ADR. It trades about -0.01 of its total potential returns per unit of risk. Legrand SA ADR is currently generating about 0.04 per unit of volatility. If you would invest 1,602 in Legrand SA ADR on August 24, 2024 and sell it today you would earn a total of 403.00 from holding Legrand SA ADR or generate 25.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AFC Energy plc vs. Legrand SA ADR
Performance |
| Timeline |
| AFC Energy plc |
| Legrand SA ADR |
AFC Energy and Legrand SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AFC Energy and Legrand SA
The main advantage of trading using opposite AFC Energy and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AFC Energy position performs unexpectedly, Legrand SA 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 Legrand SA will offset losses from the drop in Legrand SA'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 |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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