Correlation Between AFC Energy and Lightbridge Corp

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

Diversification Opportunities for AFC Energy and Lightbridge Corp

-0.66

Correlation Coefficient

AFC Energy  Lightbridge Corp

Excellent diversification

The 3 months correlation between AFC and Lightbridge is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding AFC Energy plc and Lightbridge Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightbridge Corp 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 Lightbridge Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightbridge Corp has no effect on the direction of AFC Energy i.e., AFC Energy and Lightbridge Corp go up and down completely randomly.

Pair Corralation between AFC Energy and Lightbridge Corp

Assuming the 90 days horizon AFC Energy is expected to generate 5.59 times less return on investment than Lightbridge Corp. But when comparing it to its historical volatility, AFC Energy plc is 1.26 times less risky than Lightbridge Corp. It trades about 0.01 of its potential returns per unit of risk. Lightbridge Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  368.00  in Lightbridge Corp on September 14, 2024 and sell it today you would earn a total of  116.00  from holding Lightbridge Corp or generate 31.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

AFC Energy plc  vs.  Lightbridge Corp

AFC Energy plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFC Energy plc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Lightbridge Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lightbridge Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental drivers, Lightbridge Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AFC Energy and Lightbridge Corp

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

The idea behind AFC Energy plc and Lightbridge Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .