Correlation Between Legrand SA and AFC Energy
Can any of the company-specific risk be diversified away by investing in both Legrand SA 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 Legrand SA and AFC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legrand SA ADR and AFC Energy plc, you can compare the effects of market volatilities on Legrand SA 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 Legrand SA with a short position of AFC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legrand SA and AFC Energy.
Diversification Opportunities for Legrand SA and AFC Energy
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Legrand and AFC is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Legrand SA ADR 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 Legrand SA 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 Legrand SA ADR 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 Legrand SA i.e., Legrand SA and AFC Energy go up and down completely randomly.
Pair Corralation between Legrand SA and AFC Energy
Assuming the 90 days horizon Legrand SA ADR is expected to generate 0.26 times more return on investment than AFC Energy. However, Legrand SA ADR is 3.83 times less risky than AFC Energy. It trades about 0.03 of its potential returns per unit of risk. AFC Energy plc is currently generating about -0.01 per unit of risk. If you would invest 1,791 in Legrand SA ADR on November 5, 2024 and sell it today you would earn a total of 247.00 from holding Legrand SA ADR or generate 13.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legrand SA ADR vs. AFC Energy plc
Performance |
| Timeline |
| Legrand SA ADR |
| AFC Energy plc |
Legrand SA and AFC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legrand SA and AFC Energy
The main advantage of trading using opposite Legrand SA and AFC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legrand SA 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.| Legrand SA vs. AFC Energy plc | Legrand SA vs. Loop Energy | Legrand SA vs. Sunrise New Energy | Legrand SA vs. Signify NV |
| AFC Energy vs. Legrand SA ADR | AFC Energy vs. Loop Energy | AFC Energy vs. Sunrise New Energy | AFC Energy vs. Alfen NV |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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