Correlation Between Avance Gas and FLEX LNG
Can any of the company-specific risk be diversified away by investing in both Avance Gas and FLEX LNG 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 Avance Gas and FLEX LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avance Gas Holding and FLEX LNG, you can compare the effects of market volatilities on Avance Gas and FLEX LNG 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 Avance Gas with a short position of FLEX LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avance Gas and FLEX LNG.
Diversification Opportunities for Avance Gas and FLEX LNG
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Avance and FLEX is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Avance Gas Holding and FLEX LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLEX LNG and Avance Gas 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 Avance Gas Holding are associated (or correlated) with FLEX LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLEX LNG has no effect on the direction of Avance Gas i.e., Avance Gas and FLEX LNG go up and down completely randomly.
Pair Corralation between Avance Gas and FLEX LNG
Assuming the 90 days trading horizon Avance Gas Holding is expected to under-perform the FLEX LNG. In addition to that, Avance Gas is 1.72 times more volatile than FLEX LNG. It trades about -0.02 of its total potential returns per unit of risk. FLEX LNG is currently generating about 0.12 per unit of volatility. If you would invest 27,680 in FLEX LNG on November 4, 2024 and sell it today you would earn a total of 1,300 from holding FLEX LNG or generate 4.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avance Gas Holding vs. FLEX LNG
Performance |
| Timeline |
| Avance Gas Holding |
| FLEX LNG |
Avance Gas and FLEX LNG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avance Gas and FLEX LNG
The main advantage of trading using opposite Avance Gas and FLEX LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avance Gas position performs unexpectedly, FLEX LNG 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 FLEX LNG will offset losses from the drop in FLEX LNG's long position.The idea behind Avance Gas Holding and FLEX LNG 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.| FLEX LNG vs. BW LPG | FLEX LNG vs. Frontline | FLEX LNG vs. Golden Ocean Group | FLEX LNG vs. Avance Gas Holding |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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