Correlation Between Golar LNG and Cheniere Energy
Can any of the company-specific risk be diversified away by investing in both Golar LNG and Cheniere 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 Golar LNG and Cheniere Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Golar LNG Limited and Cheniere Energy Partners, you can compare the effects of market volatilities on Golar LNG and Cheniere 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 Golar LNG with a short position of Cheniere Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golar LNG and Cheniere Energy.
Diversification Opportunities for Golar LNG and Cheniere Energy
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Golar and Cheniere is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Golar LNG Limited and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners and Golar 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 Golar LNG Limited are associated (or correlated) with Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of Golar LNG i.e., Golar LNG and Cheniere Energy go up and down completely randomly.
Pair Corralation between Golar LNG and Cheniere Energy
Given the investment horizon of 90 days Golar LNG is expected to generate 913.71 times less return on investment than Cheniere Energy. In addition to that, Golar LNG is 1.69 times more volatile than Cheniere Energy Partners. It trades about 0.0 of its total potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.47 per unit of volatility. If you would invest 4,788 in Cheniere Energy Partners on August 27, 2024 and sell it today you would earn a total of 676.00 from holding Cheniere Energy Partners or generate 14.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Golar LNG Limited vs. Cheniere Energy Partners
Performance |
| Timeline |
| Golar LNG Limited |
| Cheniere Energy Partners |
Golar LNG and Cheniere Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golar LNG and Cheniere Energy
The main advantage of trading using opposite Golar LNG and Cheniere Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golar LNG position performs unexpectedly, Cheniere 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 Cheniere Energy will offset losses from the drop in Cheniere Energy's long position.| Golar LNG vs. Teekay Tankers | Golar LNG vs. International Seaways | Golar LNG vs. Frontline | Golar LNG vs. DHT Holdings |
| Cheniere Energy vs. Plains All American | Cheniere Energy vs. Genesis Energy LP | Cheniere Energy vs. Western Midstream Partners | Cheniere Energy vs. Hess Midstream Partners |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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