Correlation Between Lundin Energy and NXP Semiconductors

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

Diversification Opportunities for Lundin Energy and NXP Semiconductors

0.44

Correlation Coefficient

Lundin Energy  NXP Semiconductors

Very weak diversification

The 3 months correlation between Lundin and NXP is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors 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 NXP Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXP Semiconductors has no effect on the direction of Lundin Energy i.e., Lundin Energy and NXP Semiconductors go up and down completely randomly.

Pair Corralation between Lundin Energy and NXP Semiconductors

Assuming the 90 days horizon Lundin Energy AB is expected to under-perform the NXP Semiconductors. In addition to that, Lundin Energy is 1.31 times more volatile than NXP Semiconductors NV. It trades about -0.23 of its total potential returns per unit of risk. NXP Semiconductors NV is currently generating about -0.04 per unit of volatility. If you would invest  20,400  in NXP Semiconductors NV on December 28, 2024 and sell it today you would lose (1,250) from holding NXP Semiconductors NV or give up 6.13% of portfolio value over 90 days.

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

Lundin Energy AB  vs.  NXP Semiconductors NV

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.

NXP Semiconductors

Risk-Adjusted Performance

Very Weak

Over the last 90 days NXP Semiconductors NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NXP Semiconductors is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lundin Energy and NXP Semiconductors

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

The idea behind Lundin Energy AB and NXP Semiconductors NV 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..