Correlation Between Golar LNG and Plains GP
Can any of the company-specific risk be diversified away by investing in both Golar LNG and Plains GP 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 Plains GP 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 Plains GP Holdings, you can compare the effects of market volatilities on Golar LNG and Plains GP 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 Plains GP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golar LNG and Plains GP.
Diversification Opportunities for Golar LNG and Plains GP
Good diversification
The 3 months correlation between Golar and Plains is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Golar LNG Limited and Plains GP Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plains GP Holdings 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 Plains GP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plains GP Holdings has no effect on the direction of Golar LNG i.e., Golar LNG and Plains GP go up and down completely randomly.
Pair Corralation between Golar LNG and Plains GP
Given the investment horizon of 90 days Golar LNG Limited is expected to generate 2.09 times more return on investment than Plains GP. However, Golar LNG is 2.09 times more volatile than Plains GP Holdings. It trades about 0.13 of its potential returns per unit of risk. Plains GP Holdings is currently generating about 0.05 per unit of risk. If you would invest 3,273 in Golar LNG Limited on August 28, 2024 and sell it today you would earn a total of 678.00 from holding Golar LNG Limited or generate 20.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Golar LNG Limited vs. Plains GP Holdings
Performance |
| Timeline |
| Golar LNG Limited |
| Plains GP Holdings |
Golar LNG and Plains GP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golar LNG and Plains GP
The main advantage of trading using opposite Golar LNG and Plains GP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golar LNG position performs unexpectedly, Plains GP 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 Plains GP will offset losses from the drop in Plains GP's long position.| Golar LNG vs. Teekay Tankers | Golar LNG vs. International Seaways | Golar LNG vs. Frontline | Golar LNG vs. DHT Holdings |
| Plains GP vs. Targa Resources | Plains GP vs. Western Midstream Partners | Plains GP vs. MPLX LP | Plains GP vs. Plains All American |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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