Correlation Between AFC Gamma and Hannon Armstrong

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

By analyzing existing cross correlation between AFC Gamma and Hannon Armstrong Sustainable, you can compare the effects of market volatilities on AFC Gamma and Hannon Armstrong 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 Gamma with a short position of Hannon Armstrong. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFC Gamma and Hannon Armstrong.

Diversification Opportunities for AFC Gamma and Hannon Armstrong

0.7

Correlation Coefficient

AFC Gamma  Hannon Armstrong

Poor diversification

The 3 months correlation between AFC and Hannon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AFC Gamma and Hannon Armstrong Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannon Armstrong Sus and AFC Gamma 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 Gamma are associated (or correlated) with Hannon Armstrong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannon Armstrong Sus has no effect on the direction of AFC Gamma i.e., AFC Gamma and Hannon Armstrong go up and down completely randomly.

Pair Corralation between AFC Gamma and Hannon Armstrong

Given the investment horizon of 90 days AFC Gamma is expected to under-perform the Hannon Armstrong. In addition to that, AFC Gamma is 1.04 times more volatile than Hannon Armstrong Sustainable. It trades about -0.09 of its total potential returns per unit of risk. Hannon Armstrong Sustainable is currently generating about -0.05 per unit of volatility. If you would invest  3,088  in Hannon Armstrong Sustainable on November 29, 2024 and sell it today you would lose (208.00) from holding Hannon Armstrong Sustainable or give up 6.74% of portfolio value over 90 days.

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

AFC Gamma  vs.  Hannon Armstrong Sustainable

AFC Gamma

Risk-Adjusted Performance

Very Weak

Over the last 90 days AFC Gamma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Hannon Armstrong Sus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hannon Armstrong Sustainable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with AFC Gamma and Hannon Armstrong

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

The idea behind AFC Gamma and Hannon Armstrong Sustainable 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.