Correlation Between FLEX LNG and Marine Petroleum

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

By analyzing existing cross correlation between FLEX LNG and Marine Petroleum Trust, you can compare the effects of market volatilities on FLEX LNG and Marine Petroleum 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 Marine Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLEX LNG and Marine Petroleum.

Diversification Opportunities for FLEX LNG and Marine Petroleum

0.68

Correlation Coefficient

FLEX LNG  Marine Petroleum

Poor diversification

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

Pair Corralation between FLEX LNG and Marine Petroleum

Given the investment horizon of 90 days FLEX LNG is expected to under-perform the Marine Petroleum. In addition to that, FLEX LNG is 1.47 times more volatile than Marine Petroleum Trust. It trades about -0.28 of its total potential returns per unit of risk. Marine Petroleum Trust is currently generating about -0.03 per unit of volatility. If you would invest  394.00  in Marine Petroleum Trust on December 5, 2024 and sell it today you would lose (4.00) from holding Marine Petroleum Trust or give up 1.02% of portfolio value over 90 days.

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

FLEX LNG  vs.  Marine Petroleum Trust

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. Despite nearly stable basic indicators, FLEX LNG is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Marine Petroleum Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marine Petroleum Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Marine Petroleum may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with FLEX LNG and Marine Petroleum

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

The idea behind FLEX LNG and Marine Petroleum Trust 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.