Correlation Between Lundin Energy and Sekisui House

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

Diversification Opportunities for Lundin Energy and Sekisui House

0.64

Correlation Coefficient

Lundin Energy  Sekisui House

Poor diversification

The 3 months correlation between Lundin and Sekisui is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and Sekisui House Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui House 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 Sekisui House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui House has no effect on the direction of Lundin Energy i.e., Lundin Energy and Sekisui House go up and down completely randomly.

Pair Corralation between Lundin Energy and Sekisui House

Assuming the 90 days horizon Lundin Energy AB is expected to under-perform the Sekisui House. In addition to that, Lundin Energy is 1.37 times more volatile than Sekisui House Ltd. It trades about -0.13 of its total potential returns per unit of risk. Sekisui House Ltd is currently generating about -0.08 per unit of volatility. If you would invest  2,616  in Sekisui House Ltd on September 4, 2024 and sell it today you would lose (220.00) from holding Sekisui House Ltd or give up 8.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Lundin Energy AB  vs.  Sekisui House Ltd

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.

Sekisui House

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sekisui House Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lundin Energy and Sekisui House

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

The idea behind Lundin Energy AB and Sekisui House Ltd 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.