Correlation Between Lundin Energy and Lasertec

Can any of the company-specific risk be diversified away by investing in both Lundin Energy and Lasertec 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 Lasertec 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 Lasertec, you can compare the effects of market volatilities on Lundin Energy and Lasertec 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 Lasertec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lundin Energy and Lasertec.

Diversification Opportunities for Lundin Energy and Lasertec

0.85

Correlation Coefficient

Lundin Energy  Lasertec

Very poor diversification

The 3 months correlation between Lundin and Lasertec is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and Lasertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lasertec 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 Lasertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lasertec has no effect on the direction of Lundin Energy i.e., Lundin Energy and Lasertec go up and down completely randomly.

Pair Corralation between Lundin Energy and Lasertec

Assuming the 90 days horizon Lundin Energy AB is expected to generate 0.84 times more return on investment than Lasertec. However, Lundin Energy AB is 1.19 times less risky than Lasertec. It trades about 0.01 of its potential returns per unit of risk. Lasertec is currently generating about -0.33 per unit of risk. If you would invest  60.00  in Lundin Energy AB on September 18, 2024 and sell it today you would earn a total of  0.00  from holding Lundin Energy AB or generate 0.0% return on investment over 90 days.

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

Lundin Energy AB  vs.  Lasertec

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.

Lasertec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lasertec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lundin Energy and Lasertec

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

The idea behind Lundin Energy AB and Lasertec 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.