Correlation Between Flex LNG and Cell Impact

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

By analyzing existing cross correlation between Flex LNG and Cell Impact AB, you can compare the effects of market volatilities on Flex LNG and Cell Impact 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 Cell Impact. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flex LNG and Cell Impact.

Diversification Opportunities for Flex LNG and Cell Impact

-0.32

Correlation Coefficient

Flex LNG  Cell Impact

Very good diversification

The 3 months correlation between Flex and Cell is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Flex LNG and Cell Impact AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cell Impact AB 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 Cell Impact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cell Impact AB has no effect on the direction of Flex LNG i.e., Flex LNG and Cell Impact go up and down completely randomly.

Pair Corralation between Flex LNG and Cell Impact

Assuming the 90 days trading horizon Flex LNG is expected to generate 0.37 times more return on investment than Cell Impact. However, Flex LNG is 2.7 times less risky than Cell Impact. It trades about -0.04 of its potential returns per unit of risk. Cell Impact AB is currently generating about -0.13 per unit of risk. If you would invest  26,500  in Flex LNG on December 2, 2024 and sell it today you would lose (1,780) from holding Flex LNG or give up 6.72% of portfolio value over 90 days.

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

Flex LNG  vs.  Cell Impact AB

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. In spite of comparatively stable basic indicators, Flex LNG is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cell Impact AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cell Impact AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Flex LNG and Cell Impact

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

The idea behind Flex LNG and Cell Impact AB 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.