Correlation Between Lundin Energy and Hitachi

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

Diversification Opportunities for Lundin Energy and Hitachi

-0.33

Correlation Coefficient

Lundin Energy  Hitachi

Very good diversification

The 3 months correlation between Lundin and Hitachi is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi 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 Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi has no effect on the direction of Lundin Energy i.e., Lundin Energy and Hitachi go up and down completely randomly.

Pair Corralation between Lundin Energy and Hitachi

Assuming the 90 days horizon Lundin Energy AB is expected to under-perform the Hitachi. But the stock apears to be less risky and, when comparing its historical volatility, Lundin Energy AB is 1.12 times less risky than Hitachi. The stock trades about -0.15 of its potential returns per unit of risk. The Hitachi is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,188  in Hitachi on September 12, 2024 and sell it today you would earn a total of  288.00  from holding Hitachi or generate 13.16% return on investment over 90 days.

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

Lundin Energy AB  vs.  Hitachi

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.

Hitachi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hitachi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lundin Energy and Hitachi

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

The idea behind Lundin Energy AB and Hitachi 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.