Correlation Between AFC Energy and Microvast Holdings

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

Diversification Opportunities for AFC Energy and Microvast Holdings

0.7

Correlation Coefficient

AFC Energy  Microvast Holdings

Poor diversification

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

Pair Corralation between AFC Energy and Microvast Holdings

Assuming the 90 days horizon AFC Energy plc is expected to generate 0.89 times more return on investment than Microvast Holdings. However, AFC Energy plc is 1.12 times less risky than Microvast Holdings. It trades about -0.05 of its potential returns per unit of risk. Microvast Holdings is currently generating about -0.14 per unit of risk. If you would invest  12.00  in AFC Energy plc on December 29, 2024 and sell it today you would lose (3.60) from holding AFC Energy plc or give up 30.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

AFC Energy plc  vs.  Microvast Holdings

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.

Microvast Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microvast Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AFC Energy and Microvast Holdings

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

The idea behind AFC Energy plc and Microvast Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..