Correlation Between FLEX LNG and Viper Energy

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

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

Diversification Opportunities for FLEX LNG and Viper Energy

-0.42

Correlation Coefficient

FLEX LNG  Viper Energy

Very good diversification

The 3 months correlation between FLEX and Viper is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding FLEX LNG and Viper Energy Ut in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viper Energy Ut 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 Viper Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viper Energy Ut has no effect on the direction of FLEX LNG i.e., FLEX LNG and Viper Energy go up and down completely randomly.

Pair Corralation between FLEX LNG and Viper Energy

Given the investment horizon of 90 days FLEX LNG is expected to under-perform the Viper Energy. In addition to that, FLEX LNG is 1.24 times more volatile than Viper Energy Ut. It trades about -0.22 of its total potential returns per unit of risk. Viper Energy Ut is currently generating about -0.06 per unit of volatility. If you would invest  5,222  in Viper Energy Ut on September 13, 2024 and sell it today you would lose (151.00) from holding Viper Energy Ut or give up 2.89% of portfolio value over 90 days.

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

FLEX LNG  vs.  Viper Energy Ut

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 unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Viper Energy Ut

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with FLEX LNG and Viper Energy

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

The idea behind FLEX LNG and Viper Energy Ut 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.