Correlation Between FLEX LNG and DHT Holdings

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

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

Diversification Opportunities for FLEX LNG and DHT Holdings

0.62

Correlation Coefficient

FLEX LNG  DHT Holdings

Poor diversification

The 3 months correlation between FLEX and DHT is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding FLEX LNG and DHT Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHT Holdings and FLEX 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 FLEX LNG are associated (or correlated) with DHT Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHT Holdings has no effect on the direction of FLEX LNG i.e., FLEX LNG and DHT Holdings go up and down completely randomly.

Pair Corralation between FLEX LNG and DHT Holdings

Given the investment horizon of 90 days FLEX LNG is expected to generate 2.26 times less return on investment than DHT Holdings. But when comparing it to its historical volatility, FLEX LNG is 1.21 times less risky than DHT Holdings. It trades about 0.07 of its potential returns per unit of risk. DHT Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  918.00  in DHT Holdings on December 26, 2024 and sell it today you would earn a total of  170.00  from holding DHT Holdings or generate 18.52% return on investment over 90 days.

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

FLEX LNG  vs.  DHT Holdings

FLEX LNG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FLEX LNG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, FLEX LNG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DHT Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DHT Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical indicators, DHT Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FLEX LNG and DHT Holdings

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

The idea behind FLEX LNG and DHT Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.