Correlation Between Lundin Energy and Coupang

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

Diversification Opportunities for Lundin Energy and Coupang

-0.74

Correlation Coefficient

Lundin Energy  Coupang

Pay attention - limited upside

The 3 months correlation between Lundin and Coupang is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and Coupang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang 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 Coupang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang has no effect on the direction of Lundin Energy i.e., Lundin Energy and Coupang go up and down completely randomly.

Pair Corralation between Lundin Energy and Coupang

Assuming the 90 days horizon Lundin Energy AB is expected to under-perform the Coupang. In addition to that, Lundin Energy is 1.58 times more volatile than Coupang. It trades about -0.05 of its total potential returns per unit of risk. Coupang is currently generating about 0.04 per unit of volatility. If you would invest  1,728  in Coupang on September 3, 2024 and sell it today you would earn a total of  662.00  from holding Coupang or generate 38.31% 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.  Coupang

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 uncertain 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.

Coupang

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Lundin Energy and Coupang

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

The idea behind Lundin Energy AB and Coupang 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.