Correlation Between FLEX LNG and New Fortress

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

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

Diversification Opportunities for FLEX LNG and New Fortress

-0.65

Correlation Coefficient

FLEX LNG  New Fortress

Excellent diversification

The 3 months correlation between FLEX and New is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding FLEX LNG and New Fortress Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Fortress Energy 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 New Fortress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Fortress Energy has no effect on the direction of FLEX LNG i.e., FLEX LNG and New Fortress go up and down completely randomly.

Pair Corralation between FLEX LNG and New Fortress

Given the investment horizon of 90 days FLEX LNG is expected to under-perform the New Fortress. But the stock apears to be less risky and, when comparing its historical volatility, FLEX LNG is 2.18 times less risky than New Fortress. The stock trades about -0.06 of its potential returns per unit of risk. The New Fortress Energy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  893.00  in New Fortress Energy on October 8, 2024 and sell it today you would earn a total of  666.00  from holding New Fortress Energy or generate 74.58% return on investment over 90 days.

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

FLEX LNG  vs.  New Fortress Energy

FLEX LNG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FLEX LNG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

New Fortress Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Fortress Energy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, New Fortress exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FLEX LNG and New Fortress

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

The idea behind FLEX LNG and New Fortress 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.