Correlation Between Lundin Energy and Renew Energy

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

Diversification Opportunities for Lundin Energy and Renew Energy

-0.43

Correlation Coefficient

Lundin Energy  Renew Energy

Very good diversification

The 3 months correlation between Lundin and Renew is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and Renew Energy Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renew Energy Global 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 Renew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renew Energy Global has no effect on the direction of Lundin Energy i.e., Lundin Energy and Renew Energy go up and down completely randomly.

Pair Corralation between Lundin Energy and Renew Energy

Assuming the 90 days horizon Lundin Energy AB is expected to under-perform the Renew Energy. In addition to that, Lundin Energy is 1.36 times more volatile than Renew Energy Global. It trades about -0.04 of its total potential returns per unit of risk. Renew Energy Global is currently generating about 0.02 per unit of volatility. If you would invest  585.00  in Renew Energy Global on October 24, 2024 and sell it today you would earn a total of  87.50  from holding Renew Energy Global or generate 14.96% return on investment over 90 days.

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

Lundin Energy AB  vs.  Renew Energy Global

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 abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Renew Energy Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Renew Energy Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Renew Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lundin Energy and Renew Energy

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

The idea behind Lundin Energy AB and Renew Energy Global 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.