Correlation Between First National and Lundin Energy

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

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

Diversification Opportunities for First National and Lundin Energy

0.39

Correlation Coefficient

First National  Lundin Energy

Weak diversification

The 3 months correlation between First and Lundin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding First National Energy 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 First National 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 First National Energy 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 First National i.e., First National and Lundin Energy go up and down completely randomly.

Pair Corralation between First National and Lundin Energy

Given the investment horizon of 90 days First National Energy is expected to generate 21.64 times more return on investment than Lundin Energy. However, First National is 21.64 times more volatile than Lundin Energy AB. It trades about 0.09 of its potential returns per unit of risk. Lundin Energy AB is currently generating about -0.04 per unit of risk. If you would invest  55.00  in First National Energy on September 4, 2024 and sell it today you would lose (45.94) from holding First National Energy or give up 83.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

First National Energy  vs.  Lundin Energy AB

First National Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First National Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First National is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 First National and Lundin Energy

The main advantage of trading using opposite First National and Lundin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National 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 First National Energy 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 Commodity Directory module to find actively traded commodities issued by global exchanges.