Correlation Between Orsted A/S and Lundin Energy
Can any of the company-specific risk be diversified away by investing in both Orsted A/S 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 Orsted A/S and Lundin Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orsted AS and Lundin Energy AB, you can compare the effects of market volatilities on Orsted A/S 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 Orsted A/S with a short position of Lundin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orsted A/S and Lundin Energy.
Diversification Opportunities for Orsted A/S and Lundin Energy
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Orsted and Lundin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS 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 Orsted A/S 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 Orsted AS 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 Orsted A/S i.e., Orsted A/S and Lundin Energy go up and down completely randomly.
Pair Corralation between Orsted A/S and Lundin Energy
Assuming the 90 days horizon Orsted AS is expected to generate 1.43 times more return on investment than Lundin Energy. However, Orsted A/S is 1.43 times more volatile than Lundin Energy AB. It trades about -0.09 of its potential returns per unit of risk. Lundin Energy AB is currently generating about -0.36 per unit of risk. If you would invest 6,116 in Orsted AS on August 27, 2024 and sell it today you would lose (653.00) from holding Orsted AS or give up 10.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orsted AS vs. Lundin Energy AB
Performance |
| Timeline |
| Orsted A/S |
| Lundin Energy AB |
Orsted A/S and Lundin Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orsted A/S and Lundin Energy
The main advantage of trading using opposite Orsted A/S and Lundin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orsted A/S 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.| Orsted A/S vs. Innergex Renewable Energy | Orsted A/S vs. Clearway Energy | Orsted A/S vs. Fusion Fuel Green | Orsted A/S vs. Powertap Hydrogen Capital |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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