Correlation Between Energy Vault and Lundin Energy

Can any of the company-specific risk be diversified away by investing in both Energy Vault and Lundin Energy 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 Energy Vault and Lundin Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Energy Vault Holdings and Lundin Energy AB, you can compare the effects of market volatilities on Energy Vault and Lundin Energy 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 Energy Vault with a short position of Lundin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Vault and Lundin Energy.

Diversification Opportunities for Energy Vault and Lundin Energy

-0.42

Correlation Coefficient

Energy Vault  Lundin Energy

Very good diversification

The 3 months correlation between Energy and Lundin is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Energy Vault Holdings and Lundin Energy AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Energy AB and Energy Vault 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 Energy Vault Holdings are associated (or correlated) with Lundin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Energy AB has no effect on the direction of Energy Vault i.e., Energy Vault and Lundin Energy go up and down completely randomly.

Pair Corralation between Energy Vault and Lundin Energy

Given the investment horizon of 90 days Energy Vault Holdings is expected to generate 2.96 times more return on investment than Lundin Energy. However, Energy Vault is 2.96 times more volatile than Lundin Energy AB. It trades about -0.03 of its potential returns per unit of risk. Lundin Energy AB is currently generating about -0.26 per unit of risk. If you would invest  205.00  in Energy Vault Holdings on September 4, 2024 and sell it today you would lose (34.00) from holding Energy Vault Holdings or give up 16.59% of portfolio value over 90 days.

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

Energy Vault Holdings  vs.  Lundin Energy AB

Energy Vault Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Vault Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Energy Vault showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Energy Vault and Lundin Energy

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

The idea behind Energy Vault Holdings and Lundin Energy AB 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.