Correlation Between Golar LNG and New Fortress
Can any of the company-specific risk be diversified away by investing in both Golar LNG and New Fortress 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 New Fortress 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 New Fortress Energy, you can compare the effects of market volatilities on Golar LNG and New Fortress 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 New Fortress. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golar LNG and New Fortress.
Diversification Opportunities for Golar LNG and New Fortress
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Golar and New is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Golar LNG Limited and New Fortress Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Fortress Energy 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 New Fortress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Fortress Energy has no effect on the direction of Golar LNG i.e., Golar LNG and New Fortress go up and down completely randomly.
Pair Corralation between Golar LNG and New Fortress
Given the investment horizon of 90 days Golar LNG Limited is expected to generate 0.5 times more return on investment than New Fortress. However, Golar LNG Limited is 2.01 times less risky than New Fortress. It trades about -0.05 of its potential returns per unit of risk. New Fortress Energy is currently generating about -0.15 per unit of risk. If you would invest 4,183 in Golar LNG Limited on November 9, 2024 and sell it today you would lose (100.00) from holding Golar LNG Limited or give up 2.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Golar LNG Limited vs. New Fortress Energy
Performance |
| Timeline |
| Golar LNG Limited |
| New Fortress Energy |
Golar LNG and New Fortress Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golar LNG and New Fortress
The main advantage of trading using opposite Golar LNG and New Fortress positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golar LNG position performs unexpectedly, New Fortress 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 New Fortress will offset losses from the drop in New Fortress' long position.| Golar LNG vs. Teekay Tankers | Golar LNG vs. International Seaways | Golar LNG vs. Frontline | Golar LNG vs. DHT Holdings |
| New Fortress vs. FLEX LNG | New Fortress vs. Coterra Energy | New Fortress vs. Golar LNG Limited | New Fortress vs. Excelerate Energy |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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