Correlation Between AFC Energy and ADS TEC

Can any of the company-specific risk be diversified away by investing in both AFC Energy and ADS TEC 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 ADS TEC 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 ADS TEC ENERGY PLC, you can compare the effects of market volatilities on AFC Energy and ADS TEC 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 ADS TEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFC Energy and ADS TEC.

Diversification Opportunities for AFC Energy and ADS TEC

-0.68

Correlation Coefficient

AFC Energy  ADS TEC

Excellent diversification

The 3 months correlation between AFC and ADS is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding AFC Energy plc and ADS TEC ENERGY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADS TEC ENERGY 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 ADS TEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADS TEC ENERGY has no effect on the direction of AFC Energy i.e., AFC Energy and ADS TEC go up and down completely randomly.

Pair Corralation between AFC Energy and ADS TEC

Assuming the 90 days horizon AFC Energy is expected to generate 267.63 times less return on investment than ADS TEC. But when comparing it to its historical volatility, AFC Energy plc is 18.92 times less risky than ADS TEC. It trades about 0.01 of its potential returns per unit of risk. ADS TEC ENERGY PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  28.00  in ADS TEC ENERGY PLC on September 12, 2024 and sell it today you would earn a total of  312.00  from holding ADS TEC ENERGY PLC or generate 1114.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	81.78%
Values	Daily Returns

AFC Energy plc  vs.  ADS TEC ENERGY PLC

AFC Energy plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AFC Energy plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AFC Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ADS TEC ENERGY

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADS TEC ENERGY PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, ADS TEC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AFC Energy and ADS TEC

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

The idea behind AFC Energy plc and ADS TEC ENERGY PLC 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.