Correlation Between Golar LNG and Scorpio Tankers
Can any of the company-specific risk be diversified away by investing in both Golar LNG and Scorpio Tankers 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 Scorpio Tankers 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 Scorpio Tankers, you can compare the effects of market volatilities on Golar LNG and Scorpio Tankers 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 Scorpio Tankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golar LNG and Scorpio Tankers.
Diversification Opportunities for Golar LNG and Scorpio Tankers
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Golar and Scorpio is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Golar LNG Limited and Scorpio Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scorpio Tankers 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 Scorpio Tankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scorpio Tankers has no effect on the direction of Golar LNG i.e., Golar LNG and Scorpio Tankers go up and down completely randomly.
Pair Corralation between Golar LNG and Scorpio Tankers
Given the investment horizon of 90 days Golar LNG Limited is expected to generate 1.0 times more return on investment than Scorpio Tankers. However, Golar LNG is 1.0 times more volatile than Scorpio Tankers. It trades about 0.1 of its potential returns per unit of risk. Scorpio Tankers is currently generating about -0.14 per unit of risk. If you would invest 3,204 in Golar LNG Limited on November 2, 2024 and sell it today you would earn a total of 776.00 from holding Golar LNG Limited or generate 24.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Golar LNG Limited vs. Scorpio Tankers
Performance |
| Timeline |
| Golar LNG Limited |
| Scorpio Tankers |
Golar LNG and Scorpio Tankers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golar LNG and Scorpio Tankers
The main advantage of trading using opposite Golar LNG and Scorpio Tankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golar LNG position performs unexpectedly, Scorpio Tankers 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 Scorpio Tankers will offset losses from the drop in Scorpio Tankers' long position.| Golar LNG vs. Teekay Tankers | Golar LNG vs. International Seaways | Golar LNG vs. Frontline | Golar LNG vs. DHT Holdings |
| Scorpio Tankers vs. Teekay Tankers | Scorpio Tankers vs. Navigator Holdings | Scorpio Tankers vs. DHT Holdings | Scorpio Tankers vs. Frontline |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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