Correlation Between AFC Energy and FREYR Battery

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

Diversification Opportunities for AFC Energy and FREYR Battery

-0.27

Correlation Coefficient

AFC Energy  FREYR Battery

Very good diversification

The 3 months correlation between AFC and FREYR is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding AFC Energy plc and FREYR Battery SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FREYR Battery SA 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 FREYR Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FREYR Battery SA has no effect on the direction of AFC Energy i.e., AFC Energy and FREYR Battery go up and down completely randomly.

Pair Corralation between AFC Energy and FREYR Battery

Assuming the 90 days horizon AFC Energy plc is expected to under-perform the FREYR Battery. But the pink sheet apears to be less risky and, when comparing its historical volatility, AFC Energy plc is 1.69 times less risky than FREYR Battery. The pink sheet trades about -0.05 of its potential returns per unit of risk. The FREYR Battery SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  113.00  in FREYR Battery SA on September 1, 2024 and sell it today you would earn a total of  94.00  from holding FREYR Battery SA or generate 83.19% return on investment over 90 days.

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

AFC Energy plc  vs.  FREYR Battery SA

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

FREYR Battery SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FREYR Battery SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, FREYR Battery showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AFC Energy and FREYR Battery

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

The idea behind AFC Energy plc and FREYR Battery SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.