Correlation Between AFC Energy and SPDR SP

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

Diversification Opportunities for AFC Energy and SPDR SP

0.84

Correlation Coefficient

AFC Energy  SPDR SP

Very poor diversification

The 3 months correlation between AFC and SPDR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding AFC Energy plc and SPDR SP Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Materials 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Materials has no effect on the direction of AFC Energy i.e., AFC Energy and SPDR SP go up and down completely randomly.

Pair Corralation between AFC Energy and SPDR SP

Assuming the 90 days trading horizon AFC Energy plc is expected to generate 10.2 times more return on investment than SPDR SP. However, AFC Energy is 10.2 times more volatile than SPDR SP Materials. It trades about 0.16 of its potential returns per unit of risk. SPDR SP Materials is currently generating about 0.19 per unit of risk. If you would invest  550.00  in AFC Energy plc on April 20, 2025 and sell it today you would earn a total of  522.00  from holding AFC Energy plc or generate 94.91% return on investment over 90 days.

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

AFC Energy plc  vs.  SPDR SP Materials

AFC Energy plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AFC Energy plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, AFC Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

SPDR SP Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Materials are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with AFC Energy and SPDR SP

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

The idea behind AFC Energy plc and SPDR SP Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.