Correlation Between Cars and Lundin Energy
Can any of the company-specific risk be diversified away by investing in both Cars 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 Cars and Lundin Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Lundin Energy AB, you can compare the effects of market volatilities on Cars 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 Cars with a short position of Lundin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Lundin Energy.
Diversification Opportunities for Cars and Lundin Energy
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cars and Lundin is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc 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 Cars 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 Cars Inc 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 Cars i.e., Cars and Lundin Energy go up and down completely randomly.
Pair Corralation between Cars and Lundin Energy
Assuming the 90 days horizon Cars Inc is expected to under-perform the Lundin Energy. But the stock apears to be less risky and, when comparing its historical volatility, Cars Inc is 1.23 times less risky than Lundin Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Lundin Energy AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 54.00 in Lundin Energy AB on September 13, 2024 and sell it today you would earn a total of 3.00 from holding Lundin Energy AB or generate 5.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Cars Inc vs. Lundin Energy AB
Performance |
Timeline |
Cars Inc |
Lundin Energy AB |
Cars and Lundin Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cars and Lundin Energy
The main advantage of trading using opposite Cars and Lundin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars 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.Cars vs. Superior Plus Corp | Cars vs. SIVERS SEMICONDUCTORS AB | Cars vs. Norsk Hydro ASA | Cars vs. Reliance Steel Aluminum |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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