Correlation Between HF FOODS and Lundin Energy

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

By analyzing existing cross correlation between HF FOODS GRP and Lundin Energy AB, you can compare the effects of market volatilities on HF FOODS and Lundin 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 HF FOODS with a short position of Lundin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of HF FOODS and Lundin Energy.

Diversification Opportunities for HF FOODS and Lundin Energy

-0.66

Correlation Coefficient

HF FOODS  Lundin Energy

Excellent diversification

The 3 months correlation between 3GX and Lundin is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding HF FOODS GRP and Lundin Energy AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Energy AB and HF FOODS 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 HF FOODS GRP are associated (or correlated) with Lundin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Energy AB has no effect on the direction of HF FOODS i.e., HF FOODS and Lundin Energy go up and down completely randomly.

Pair Corralation between HF FOODS and Lundin Energy

Assuming the 90 days horizon HF FOODS GRP is expected to generate 1.14 times more return on investment than Lundin Energy. However, HF FOODS is 1.14 times more volatile than Lundin Energy AB. It trades about 0.01 of its potential returns per unit of risk. Lundin Energy AB is currently generating about -0.02 per unit of risk. If you would invest  428.00  in HF FOODS GRP on September 12, 2024 and sell it today you would lose (68.00) from holding HF FOODS GRP or give up 15.89% of portfolio value over 90 days.

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

HF FOODS GRP  vs.  Lundin Energy AB

HF FOODS GRP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HF FOODS GRP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HF FOODS reported solid returns over the last few months and may actually be approaching a breakup point.

Lundin Energy AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lundin Energy AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with HF FOODS and Lundin Energy

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

The idea behind HF FOODS GRP and Lundin Energy AB 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.