Correlation Between Euronav NV and Cheniere Energy

Can any of the company-specific risk be diversified away by investing in both Euronav NV and Cheniere Energy 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 Euronav NV and Cheniere Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Euronav NV and Cheniere Energy

0.7

Correlation Coefficient

Euronav NV  Cheniere Energy

Poor diversification

The 3 months correlation between Euronav and Cheniere is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Euronav NV and Cheniere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy and Euronav NV 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 Euronav NV are associated (or correlated) with Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy has no effect on the direction of Euronav NV i.e., Euronav NV and Cheniere Energy go up and down completely randomly.

Pair Corralation between Euronav NV and Cheniere Energy

If you would invest  17,939  in Cheniere Energy on September 30, 2024 and sell it today you would earn a total of  3,109  from holding Cheniere Energy or generate 17.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Euronav NV  vs.  Cheniere Energy

Euronav NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Euronav NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Euronav NV is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Cheniere Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Euronav NV and Cheniere Energy

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

The idea behind Euronav NV and Cheniere Energy 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.