Correlation Between Lundin Energy and Salesforce

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

Diversification Opportunities for Lundin Energy and Salesforce

-0.79

Correlation Coefficient

Lundin Energy  Salesforce

Pay attention - limited upside

The 3 months correlation between Lundin and Salesforce is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Lundin Energy i.e., Lundin Energy and Salesforce go up and down completely randomly.

Pair Corralation between Lundin Energy and Salesforce

Assuming the 90 days horizon Lundin Energy is expected to generate 1.9 times less return on investment than Salesforce. In addition to that, Lundin Energy is 1.34 times more volatile than Salesforce. It trades about 0.02 of its total potential returns per unit of risk. Salesforce is currently generating about 0.05 per unit of volatility. If you would invest  26,639  in Salesforce on October 2, 2024 and sell it today you would earn a total of  5,661  from holding Salesforce or generate 21.25% 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.  Salesforce

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Salesforce

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Salesforce reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lundin Energy and Salesforce

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

The idea behind Lundin Energy AB and Salesforce 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.