Correlation Between FLEX LNG and Golden Ocean
Can any of the company-specific risk be diversified away by investing in both FLEX LNG and Golden Ocean 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 Golden Ocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLEX LNG and Golden Ocean Group, you can compare the effects of market volatilities on FLEX LNG and Golden Ocean 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 Golden Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLEX LNG and Golden Ocean.
Diversification Opportunities for FLEX LNG and Golden Ocean
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FLEX and Golden is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding FLEX LNG and Golden Ocean Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Ocean Group 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 Golden Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Ocean Group has no effect on the direction of FLEX LNG i.e., FLEX LNG and Golden Ocean go up and down completely randomly.
Pair Corralation between FLEX LNG and Golden Ocean
Assuming the 90 days trading horizon FLEX LNG is expected to under-perform the Golden Ocean. But the stock apears to be less risky and, when comparing its historical volatility, FLEX LNG is 1.29 times less risky than Golden Ocean. The stock trades about -0.01 of its potential returns per unit of risk. The Golden Ocean Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,457 in Golden Ocean Group on August 25, 2024 and sell it today you would earn a total of 4,843 from holding Golden Ocean Group or generate 64.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FLEX LNG vs. Golden Ocean Group
Performance |
| Timeline |
| FLEX LNG |
| Golden Ocean Group |
FLEX LNG and Golden Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLEX LNG and Golden Ocean
The main advantage of trading using opposite FLEX LNG and Golden Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLEX LNG position performs unexpectedly, Golden Ocean 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 Golden Ocean will offset losses from the drop in Golden Ocean's long position.The idea behind FLEX LNG and Golden Ocean Group 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.| Golden Ocean vs. Frontline | Golden Ocean vs. BW LPG | Golden Ocean vs. Jinhui Shipping and | Golden Ocean vs. FLEX LNG |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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