Correlation Between AFC Energy and Solid Power

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

Diversification Opportunities for AFC Energy and Solid Power

0.47

Correlation Coefficient

AFC Energy  Solid Power

Very weak diversification

The 3 months correlation between AFC and Solid is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding AFC Energy plc and Solid Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Power 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 Solid Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid Power has no effect on the direction of AFC Energy i.e., AFC Energy and Solid Power go up and down completely randomly.

Pair Corralation between AFC Energy and Solid Power

Assuming the 90 days horizon AFC Energy plc is expected to generate 1.86 times more return on investment than Solid Power. However, AFC Energy is 1.86 times more volatile than Solid Power. It trades about 0.01 of its potential returns per unit of risk. Solid Power is currently generating about -0.04 per unit of risk. If you would invest  15.00  in AFC Energy plc on September 12, 2024 and sell it today you would lose (1.00) from holding AFC Energy plc or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

AFC Energy plc  vs.  Solid Power

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.

Solid Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with AFC Energy and Solid Power

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

The idea behind AFC Energy plc and Solid Power 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.