Correlation Between AFC Energy and Yaskawa Electric

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

Diversification Opportunities for AFC Energy and Yaskawa Electric

0.58

Correlation Coefficient

AFC Energy  Yaskawa Electric

Very weak diversification

The 3 months correlation between AFC and Yaskawa is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding AFC Energy plc and Yaskawa Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yaskawa Electric 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 Yaskawa Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yaskawa Electric Corp has no effect on the direction of AFC Energy i.e., AFC Energy and Yaskawa Electric go up and down completely randomly.

Pair Corralation between AFC Energy and Yaskawa Electric

Assuming the 90 days horizon AFC Energy plc is expected to generate 2.86 times more return on investment than Yaskawa Electric. However, AFC Energy is 2.86 times more volatile than Yaskawa Electric Corp. It trades about 0.0 of its potential returns per unit of risk. Yaskawa Electric Corp is currently generating about -0.1 per unit of risk. If you would invest  16.00  in AFC Energy plc on September 13, 2024 and sell it today you would lose (2.00) from holding AFC Energy plc or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AFC Energy plc  vs.  Yaskawa Electric 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.

Yaskawa Electric Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yaskawa Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with AFC Energy and Yaskawa Electric

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

The idea behind AFC Energy plc and Yaskawa Electric 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.