Correlation Between Eos Energy and AFC Energy

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

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

Diversification Opportunities for Eos Energy and AFC Energy

0.49

Correlation Coefficient

Eos Energy  AFC Energy

Very weak diversification

The 3 months correlation between Eos and AFC is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Eos Energy Enterprises 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 Eos 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 Eos Energy Enterprises 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 Eos Energy i.e., Eos Energy and AFC Energy go up and down completely randomly.

Pair Corralation between Eos Energy and AFC Energy

Given the investment horizon of 90 days Eos Energy Enterprises is expected to generate 0.96 times more return on investment than AFC Energy. However, Eos Energy Enterprises is 1.04 times less risky than AFC Energy. It trades about -0.02 of its potential returns per unit of risk. AFC Energy plc is currently generating about -0.07 per unit of risk. If you would invest  517.00  in Eos Energy Enterprises on December 26, 2024 and sell it today you would lose (105.00) from holding Eos Energy Enterprises or give up 20.31% of portfolio value over 90 days.

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

Eos Energy Enterprises  vs.  AFC Energy plc

Eos Energy Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eos Energy Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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.

Pair Trading with Eos Energy and AFC Energy

The main advantage of trading using opposite Eos Energy and AFC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eos Energy 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 Eos Energy Enterprises 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.