Correlation Between Lundin Energy and Cars

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

Diversification Opportunities for Lundin Energy and Cars

0.89

Correlation Coefficient

Lundin Energy  Cars

Very poor diversification

The 3 months correlation between Lundin and Cars is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Lundin Energy i.e., Lundin Energy and Cars go up and down completely randomly.

Pair Corralation between Lundin Energy and Cars

Assuming the 90 days horizon Lundin Energy AB is expected to under-perform the Cars. But the stock apears to be less risky and, when comparing its historical volatility, Lundin Energy AB is 1.43 times less risky than Cars. The stock trades about -0.23 of its potential returns per unit of risk. The Cars Inc is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,640  in Cars Inc on December 28, 2024 and sell it today you would lose (520.00) from holding Cars Inc or give up 31.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Lundin Energy AB  vs.  Cars Inc

Lundin Energy AB

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Cars Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lundin Energy and Cars

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

The idea behind Lundin Energy AB and Cars Inc 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 Global Correlations module to find global opportunities by holding instruments from different markets.