Correlation Between Fuji Electric and AFC Energy

Can any of the company-specific risk be diversified away by investing in both Fuji Electric 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 Fuji Electric and AFC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fuji Electric Co and AFC Energy plc, you can compare the effects of market volatilities on Fuji Electric 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 Fuji Electric with a short position of AFC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuji Electric and AFC Energy.

Diversification Opportunities for Fuji Electric and AFC Energy

0.65

Correlation Coefficient

Fuji Electric  AFC Energy

Poor diversification

The 3 months correlation between Fuji and AFC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fuji Electric Co 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 Fuji Electric 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 Fuji Electric Co 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 Fuji Electric i.e., Fuji Electric and AFC Energy go up and down completely randomly.

Pair Corralation between Fuji Electric and AFC Energy

Assuming the 90 days horizon Fuji Electric Co is expected to generate 0.33 times more return on investment than AFC Energy. However, Fuji Electric Co is 3.02 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 0.0 per unit of risk. If you would invest  1,412  in Fuji Electric Co on September 13, 2024 and sell it today you would earn a total of  42.00  from holding Fuji Electric Co or generate 2.97% return on investment over 90 days.

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

Fuji Electric Co  vs.  AFC Energy plc

Fuji Electric

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fuji Electric Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fuji Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Fuji Electric and AFC Energy

The main advantage of trading using opposite Fuji Electric and AFC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuji Electric 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.

The idea behind Fuji Electric Co and AFC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.