Correlation Between Flex LNG and TF Bank

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

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

Diversification Opportunities for Flex LNG and TF Bank

-0.07

Correlation Coefficient

Flex LNG  TF Bank

Good diversification

The 3 months correlation between Flex and TFBANK is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Flex LNG and TF Bank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TF Bank 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 TF Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TF Bank AB has no effect on the direction of Flex LNG i.e., Flex LNG and TF Bank go up and down completely randomly.

Pair Corralation between Flex LNG and TF Bank

Assuming the 90 days trading horizon Flex LNG is expected to generate 0.97 times more return on investment than TF Bank. However, Flex LNG is 1.03 times less risky than TF Bank. It trades about 0.45 of its potential returns per unit of risk. TF Bank AB is currently generating about 0.33 per unit of risk. If you would invest  23,800  in Flex LNG on October 20, 2024 and sell it today you would earn a total of  5,220  from holding Flex LNG or generate 21.93% return on investment over 90 days.

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

Flex LNG  vs.  TF Bank AB

Flex LNG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Flex LNG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

TF Bank AB

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TF Bank AB are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, TF Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flex LNG and TF Bank

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

The idea behind Flex LNG and TF Bank 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.