Correlation Between Renew Energy and Lundin Energy

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

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

Diversification Opportunities for Renew Energy and Lundin Energy

0.74

Correlation Coefficient

Renew Energy  Lundin Energy

Poor diversification

The 3 months correlation between Renew and Lundin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Renew Energy Global 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 Renew 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 Renew Energy Global 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 Renew Energy i.e., Renew Energy and Lundin Energy go up and down completely randomly.

Pair Corralation between Renew Energy and Lundin Energy

Considering the 90-day investment horizon Renew Energy Global is expected to generate 0.61 times more return on investment than Lundin Energy. However, Renew Energy Global is 1.65 times less risky than Lundin Energy. It trades about -0.07 of its potential returns per unit of risk. Lundin Energy AB is currently generating about -0.18 per unit of risk. If you would invest  676.00  in Renew Energy Global on December 25, 2024 and sell it today you would lose (57.00) from holding Renew Energy Global or give up 8.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.44%
Values	Daily Returns

Renew Energy Global  vs.  Lundin Energy AB

Renew Energy Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Renew Energy Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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 abnormal 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.

Pair Trading with Renew Energy and Lundin Energy

The main advantage of trading using opposite Renew Energy and Lundin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renew Energy 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 Renew Energy Global 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.