Correlation Between Lundin Energy and HF FOODS

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

Diversification Opportunities for Lundin Energy and HF FOODS

-0.66

Correlation Coefficient

Lundin Energy  HF FOODS

Excellent diversification

The 3 months correlation between Lundin and 3GX is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and HF FOODS GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HF FOODS GRP 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 HF FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HF FOODS GRP has no effect on the direction of Lundin Energy i.e., Lundin Energy and HF FOODS go up and down completely randomly.

Pair Corralation between Lundin Energy and HF FOODS

Assuming the 90 days horizon Lundin Energy AB is expected to under-perform the HF FOODS. But the stock apears to be less risky and, when comparing its historical volatility, Lundin Energy AB is 1.31 times less risky than HF FOODS. The stock trades about -0.16 of its potential returns per unit of risk. The HF FOODS GRP is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  290.00  in HF FOODS GRP on September 13, 2024 and sell it today you would earn a total of  70.00  from holding HF FOODS GRP or generate 24.14% return on investment over 90 days.

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

Lundin Energy AB  vs.  HF FOODS GRP

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.

HF FOODS GRP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HF FOODS GRP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HF FOODS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lundin Energy and HF FOODS

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

The idea behind Lundin Energy AB and HF FOODS GRP 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.