Correlation Between Lundin Energy and Strategic Education

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

Diversification Opportunities for Lundin Energy and Strategic Education

0.71

Correlation Coefficient

Lundin Energy  Strategic Education

Poor diversification

The 3 months correlation between Lundin and Strategic is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education 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 Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of Lundin Energy i.e., Lundin Energy and Strategic Education go up and down completely randomly.

Pair Corralation between Lundin Energy and Strategic Education

Assuming the 90 days horizon Lundin Energy AB is expected to under-perform the Strategic Education. In addition to that, Lundin Energy is 1.11 times more volatile than Strategic Education. It trades about -0.22 of its total potential returns per unit of risk. Strategic Education is currently generating about -0.05 per unit of volatility. If you would invest  8,737  in Strategic Education on December 30, 2024 and sell it today you would lose (837.00) from holding Strategic Education or give up 9.58% of portfolio value over 90 days.

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

Lundin Energy AB  vs.  Strategic Education

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 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.

Strategic Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strategic Education 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.

Pair Trading with Lundin Energy and Strategic Education

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

The idea behind Lundin Energy AB and Strategic Education 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.