Correlation Between AFC Energy and ITM Power

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

Diversification Opportunities for AFC Energy and ITM Power

0.49

Correlation Coefficient

AFC Energy  ITM Power

Very weak diversification

The 3 months correlation between AFC and ITM is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding AFC Energy plc and ITM Power Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power Plc 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 ITM Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Power Plc has no effect on the direction of AFC Energy i.e., AFC Energy and ITM Power go up and down completely randomly.

Pair Corralation between AFC Energy and ITM Power

Assuming the 90 days horizon AFC Energy is expected to generate 7.78 times less return on investment than ITM Power. In addition to that, AFC Energy is 1.49 times more volatile than ITM Power Plc. It trades about 0.0 of its total potential returns per unit of risk. ITM Power Plc is currently generating about 0.06 per unit of volatility. If you would invest  95.00  in ITM Power Plc on July 19, 2025 and sell it today you would earn a total of  10.00  from holding ITM Power Plc or generate 10.53% return on investment over 90 days.

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

AFC Energy plc  vs.  ITM Power Plc

AFC Energy plc

Risk-Adjusted Performance

Weakest

Over the last 90 days AFC Energy plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AFC Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ITM Power Plc

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in ITM Power Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ITM Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AFC Energy and ITM Power

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

The idea behind AFC Energy plc and ITM Power 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.