Correlation Between Golar LNG and Consorcio ARA

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

By analyzing existing cross correlation between Golar LNG Limited and Consorcio ARA S, you can compare the effects of market volatilities on Golar LNG and Consorcio ARA 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 Golar LNG with a short position of Consorcio ARA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golar LNG and Consorcio ARA.

Diversification Opportunities for Golar LNG and Consorcio ARA

-0.49

Correlation Coefficient

Golar LNG  Consorcio ARA

Very good diversification

The 3 months correlation between Golar and Consorcio is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Golar LNG Limited and Consorcio ARA S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consorcio ARA S and Golar 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 Golar LNG Limited are associated (or correlated) with Consorcio ARA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consorcio ARA S has no effect on the direction of Golar LNG i.e., Golar LNG and Consorcio ARA go up and down completely randomly.

Pair Corralation between Golar LNG and Consorcio ARA

Given the investment horizon of 90 days Golar LNG Limited is expected to under-perform the Consorcio ARA. In addition to that, Golar LNG is 1.09 times more volatile than Consorcio ARA S. It trades about -0.05 of its total potential returns per unit of risk. Consorcio ARA S is currently generating about 0.1 per unit of volatility. If you would invest  14.00  in Consorcio ARA S on December 29, 2024 and sell it today you would earn a total of  2.00  from holding Consorcio ARA S or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Golar LNG Limited  vs.  Consorcio ARA S

Golar LNG Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golar LNG Limited 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.

Consorcio ARA S

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Consorcio ARA S are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Consorcio ARA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golar LNG and Consorcio ARA

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

The idea behind Golar LNG Limited and Consorcio ARA S 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.