Correlation Between Brooge Energy and FLEX LNG
Can any of the company-specific risk be diversified away by investing in both Brooge Energy 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 Brooge Energy and FLEX LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brooge Energy Limited and FLEX LNG, you can compare the effects of market volatilities on Brooge Energy 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 Brooge Energy with a short position of FLEX LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brooge Energy and FLEX LNG.
Diversification Opportunities for Brooge Energy and FLEX LNG
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Brooge and FLEX is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Brooge Energy Limited and FLEX LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLEX LNG and Brooge 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 Brooge Energy Limited 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 Brooge Energy i.e., Brooge Energy and FLEX LNG go up and down completely randomly.
Pair Corralation between Brooge Energy and FLEX LNG
Assuming the 90 days horizon Brooge Energy Limited is expected to generate 92.35 times more return on investment than FLEX LNG. However, Brooge Energy is 92.35 times more volatile than FLEX LNG. It trades about 0.18 of its potential returns per unit of risk. FLEX LNG is currently generating about -0.06 per unit of risk. If you would invest 0.40 in Brooge Energy Limited on August 31, 2024 and sell it today you would lose (0.29) from holding Brooge Energy Limited or give up 72.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 60.32% |
| Values | Daily Returns |
Brooge Energy Limited vs. FLEX LNG
Performance |
| Timeline |
| Brooge Energy Limited |
| FLEX LNG |
Brooge Energy and FLEX LNG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brooge Energy and FLEX LNG
The main advantage of trading using opposite Brooge Energy and FLEX LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brooge Energy 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 Brooge Energy Limited 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. Frontline | FLEX LNG vs. Torm PLC Class | FLEX LNG vs. Navigator Holdings | FLEX LNG vs. Teekay Tankers |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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