Correlation Between SPDR SP and AFC Energy

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

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

Diversification Opportunities for SPDR SP and AFC Energy

0.61

Correlation Coefficient

SPDR SP  AFC Energy

Poor diversification

The 3 months correlation between SPDR and AFC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Materials 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 SPDR SP 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 SPDR SP Materials 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 SPDR SP i.e., SPDR SP and AFC Energy go up and down completely randomly.

Pair Corralation between SPDR SP and AFC Energy

Assuming the 90 days trading horizon SPDR SP is expected to generate 8.63 times less return on investment than AFC Energy. But when comparing it to its historical volatility, SPDR SP Materials is 10.2 times less risky than AFC Energy. It trades about 0.19 of its potential returns per unit of risk. AFC Energy plc is currently generating about 0.16 of returns per unit of risk over similar time horizon. 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	Significant
Accuracy	100.0%
Values	Daily Returns

SPDR SP Materials  vs.  AFC Energy plc

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.

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.

Pair Trading with SPDR SP and AFC Energy

The main advantage of trading using opposite SPDR SP and AFC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP Materials 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.