Correlation Between COMMERCIAL VEHICLE and Lundin Energy

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

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

Diversification Opportunities for COMMERCIAL VEHICLE and Lundin Energy

0.84

Correlation Coefficient

COMMERCIAL VEHICLE  Lundin Energy

Very poor diversification

The 3 months correlation between COMMERCIAL and Lundin is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and Lundin Energy go up and down completely randomly.

Pair Corralation between COMMERCIAL VEHICLE and Lundin Energy

Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to under-perform the Lundin Energy. In addition to that, COMMERCIAL VEHICLE is 2.48 times more volatile than Lundin Energy AB. It trades about -0.13 of its total potential returns per unit of risk. Lundin Energy AB is currently generating about -0.07 per unit of volatility. If you would invest  60.00  in Lundin Energy AB on September 5, 2024 and sell it today you would lose (3.00) from holding Lundin Energy AB or give up 5.0% of portfolio value over 90 days.

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

COMMERCIAL VEHICLE  vs.  Lundin Energy AB

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 COMMERCIAL VEHICLE and Lundin Energy

The main advantage of trading using opposite COMMERCIAL VEHICLE and Lundin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.