Correlation Between AFC Energy and Mitsubishi Electric

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

Diversification Opportunities for AFC Energy and Mitsubishi Electric

-0.58

Correlation Coefficient

AFC Energy  Mitsubishi Electric

Excellent diversification

The 3 months correlation between AFC and Mitsubishi is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding AFC Energy plc and Mitsubishi Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric 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 Mitsubishi Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Electric has no effect on the direction of AFC Energy i.e., AFC Energy and Mitsubishi Electric go up and down completely randomly.

Pair Corralation between AFC Energy and Mitsubishi Electric

Assuming the 90 days horizon AFC Energy plc is expected to under-perform the Mitsubishi Electric. In addition to that, AFC Energy is 1.94 times more volatile than Mitsubishi Electric. It trades about -0.05 of its total potential returns per unit of risk. Mitsubishi Electric is currently generating about 0.08 per unit of volatility. If you would invest  1,743  in Mitsubishi Electric on December 29, 2024 and sell it today you would earn a total of  257.00  from holding Mitsubishi Electric or generate 14.74% return on investment over 90 days.

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

AFC Energy plc  vs.  Mitsubishi Electric

AFC Energy plc

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mitsubishi Electric

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Mitsubishi Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AFC Energy and Mitsubishi Electric

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

The idea behind AFC Energy plc and Mitsubishi Electric 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.