Correlation Between Verbund AG and Lundin Energy
Can any of the company-specific risk be diversified away by investing in both Verbund AG 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 Verbund AG and Lundin Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verbund AG ADR and Lundin Energy AB, you can compare the effects of market volatilities on Verbund AG 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 Verbund AG with a short position of Lundin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verbund AG and Lundin Energy.
Diversification Opportunities for Verbund AG and Lundin Energy
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Verbund and Lundin is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Verbund AG ADR 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 Verbund AG 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 Verbund AG ADR 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 Verbund AG i.e., Verbund AG and Lundin Energy go up and down completely randomly.
Pair Corralation between Verbund AG and Lundin Energy
Assuming the 90 days horizon Verbund AG ADR is expected to generate 1.82 times more return on investment than Lundin Energy. However, Verbund AG is 1.82 times more volatile than Lundin Energy AB. It trades about -0.02 of its potential returns per unit of risk. Lundin Energy AB is currently generating about -0.14 per unit of risk. If you would invest 1,695 in Verbund AG ADR on November 1, 2024 and sell it today you would lose (152.00) from holding Verbund AG ADR or give up 8.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verbund AG ADR vs. Lundin Energy AB
Performance |
| Timeline |
| Verbund AG ADR |
| Lundin Energy AB |
Verbund AG and Lundin Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verbund AG and Lundin Energy
The main advantage of trading using opposite Verbund AG and Lundin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verbund AG 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.| Verbund AG vs. Alternus Energy Group | Verbund AG vs. First National Energy | Verbund AG vs. Tokyo Electric Power | Verbund AG vs. Clearway Energy Class |
| Lundin Energy vs. Renew Energy Global | Lundin Energy vs. Energy Vault Holdings | Lundin Energy vs. Fluence Energy | Lundin Energy vs. Advent Technologies Holdings |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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