Correlation Between Snap and Golar LNG
Can any of the company-specific risk be diversified away by investing in both Snap and Golar LNG 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 Snap and Golar LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Golar LNG Limited, you can compare the effects of market volatilities on Snap and Golar LNG 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 Snap with a short position of Golar LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Golar LNG.
Diversification Opportunities for Snap and Golar LNG
Poor diversification
The 3 months correlation between Snap and Golar is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Golar LNG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golar LNG Limited and Snap 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 Snap Inc are associated (or correlated) with Golar LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golar LNG Limited has no effect on the direction of Snap i.e., Snap and Golar LNG go up and down completely randomly.
Pair Corralation between Snap and Golar LNG
Given the investment horizon of 90 days Snap Inc is expected to under-perform the Golar LNG. But the stock apears to be less risky and, when comparing its historical volatility, Snap Inc is 1.15 times less risky than Golar LNG. The stock trades about -0.11 of its potential returns per unit of risk. The Golar LNG Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,668 in Golar LNG Limited on August 31, 2024 and sell it today you would earn a total of 261.00 from holding Golar LNG Limited or generate 7.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Golar LNG Limited
Performance |
| Timeline |
| Snap Inc |
| Golar LNG Limited |
Snap and Golar LNG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Golar LNG
The main advantage of trading using opposite Snap and Golar LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Golar LNG 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 Golar LNG will offset losses from the drop in Golar LNG's long position.The idea behind Snap Inc and Golar LNG Limited 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.| Golar LNG vs. Teekay Tankers | Golar LNG vs. International Seaways | Golar LNG vs. Frontline | Golar LNG vs. DHT Holdings |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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