Correlation Between FLEX LNG and Awilco LNG
Can any of the company-specific risk be diversified away by investing in both FLEX LNG and Awilco 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 FLEX LNG and Awilco LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLEX LNG and Awilco LNG ASA, you can compare the effects of market volatilities on FLEX LNG and Awilco 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 FLEX LNG with a short position of Awilco LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLEX LNG and Awilco LNG.
Diversification Opportunities for FLEX LNG and Awilco LNG
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between FLEX and Awilco is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding FLEX LNG and Awilco LNG ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awilco LNG ASA and FLEX LNG 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 FLEX LNG are associated (or correlated) with Awilco LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awilco LNG ASA has no effect on the direction of FLEX LNG i.e., FLEX LNG and Awilco LNG go up and down completely randomly.
Pair Corralation between FLEX LNG and Awilco LNG
Assuming the 90 days trading horizon FLEX LNG is expected to generate 0.36 times more return on investment than Awilco LNG. However, FLEX LNG is 2.79 times less risky than Awilco LNG. It trades about -0.05 of its potential returns per unit of risk. Awilco LNG ASA is currently generating about -0.21 per unit of risk. If you would invest 27,768 in FLEX LNG on September 3, 2024 and sell it today you would lose (1,228) from holding FLEX LNG or give up 4.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FLEX LNG vs. Awilco LNG ASA
Performance |
| Timeline |
| FLEX LNG |
| Awilco LNG ASA |
FLEX LNG and Awilco LNG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLEX LNG and Awilco LNG
The main advantage of trading using opposite FLEX LNG and Awilco LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLEX LNG position performs unexpectedly, Awilco 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 Awilco LNG will offset losses from the drop in Awilco LNG's long position.| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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