Correlation Between Lundin Energy and PERENNIAL ENERGY

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

By analyzing existing cross correlation between Lundin Energy AB and PERENNIAL ENERGY HD 01, you can compare the effects of market volatilities on Lundin Energy and PERENNIAL 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 Lundin Energy with a short position of PERENNIAL ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lundin Energy and PERENNIAL ENERGY.

Diversification Opportunities for Lundin Energy and PERENNIAL ENERGY

-0.57

Correlation Coefficient

Lundin Energy  PERENNIAL ENERGY

Excellent diversification

The 3 months correlation between Lundin and PERENNIAL is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and PERENNIAL ENERGY HD 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PERENNIAL ENERGY and Lundin 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 Lundin Energy AB are associated (or correlated) with PERENNIAL ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PERENNIAL ENERGY has no effect on the direction of Lundin Energy i.e., Lundin Energy and PERENNIAL ENERGY go up and down completely randomly.

Pair Corralation between Lundin Energy and PERENNIAL ENERGY

Assuming the 90 days horizon Lundin Energy AB is expected to generate 0.62 times more return on investment than PERENNIAL ENERGY. However, Lundin Energy AB is 1.61 times less risky than PERENNIAL ENERGY. It trades about -0.07 of its potential returns per unit of risk. PERENNIAL ENERGY HD 01 is currently generating about -0.06 per unit of risk. 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lundin Energy AB  vs.  PERENNIAL ENERGY HD 01

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.

PERENNIAL ENERGY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PERENNIAL ENERGY HD 01 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PERENNIAL ENERGY may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lundin Energy and PERENNIAL ENERGY

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

The idea behind Lundin Energy AB and PERENNIAL ENERGY HD 01 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.