Correlation Between Ambea AB and Flex LNG

Can any of the company-specific risk be diversified away by investing in both Ambea AB and Flex 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 Ambea AB and Flex LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ambea AB and Flex LNG, you can compare the effects of market volatilities on Ambea AB and Flex 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 Ambea AB with a short position of Flex LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambea AB and Flex LNG.

Diversification Opportunities for Ambea AB and Flex LNG

-0.68

Correlation Coefficient

Ambea AB  Flex LNG

Excellent diversification

The 3 months correlation between Ambea and Flex is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ambea AB and Flex LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex LNG and Ambea AB 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 Ambea AB are associated (or correlated) with Flex LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flex LNG has no effect on the direction of Ambea AB i.e., Ambea AB and Flex LNG go up and down completely randomly.

Pair Corralation between Ambea AB and Flex LNG

Assuming the 90 days trading horizon Ambea AB is expected to generate 1.0 times more return on investment than Flex LNG. However, Ambea AB is 1.0 times more volatile than Flex LNG. It trades about 0.14 of its potential returns per unit of risk. Flex LNG is currently generating about 0.0 per unit of risk. If you would invest  9,655  in Ambea AB on December 21, 2024 and sell it today you would earn a total of  1,695  from holding Ambea AB or generate 17.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ambea AB  vs.  Flex LNG

Ambea AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambea AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ambea AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Flex LNG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flex LNG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Flex LNG is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ambea AB and Flex LNG

The main advantage of trading using opposite Ambea AB and Flex LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambea AB position performs unexpectedly, Flex 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 Flex LNG will offset losses from the drop in Flex LNG's long position.

The idea behind Ambea AB and Flex LNG 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.