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
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lundin and NXP is -0.27. 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 generate 1.48 times more return on investment than NXP Semiconductors. However, Lundin Energy is 1.48 times more volatile than NXP Semiconductors NV. It trades about 0.08 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about -0.07 per unit of risk. If you would invest 55.00 in Lundin Energy AB on September 12, 2024 and sell it today you would earn a total of 2.00 from holding Lundin Energy AB or generate 3.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lundin Energy AB vs. NXP Semiconductors NV
Performance |
| Timeline |
| Lundin Energy AB |
| NXP Semiconductors |
Lundin Energy and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
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.| Lundin Energy vs. HF FOODS GRP | Lundin Energy vs. Performance Food Group | Lundin Energy vs. Insurance Australia Group | Lundin Energy vs. AUSTEVOLL SEAFOOD |
| NXP Semiconductors vs. Apple Inc | NXP Semiconductors vs. Apple Inc | NXP Semiconductors vs. Apple Inc | NXP Semiconductors vs. Apple Inc |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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