Correlation Between Golar LNG and New Fortress

Can any of the company-specific risk be diversified away by investing in both Golar 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 Golar 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 Golar LNG Limited and New Fortress Energy, you can compare the effects of market volatilities on Golar 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 Golar LNG with a short position of New Fortress. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golar LNG and New Fortress.

Diversification Opportunities for Golar LNG and New Fortress

0.76

Correlation Coefficient

Golar LNG  New Fortress

Poor diversification

The 3 months correlation between Golar and New is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Golar LNG Limited 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 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 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 Golar LNG i.e., Golar LNG and New Fortress go up and down completely randomly.

Pair Corralation between Golar LNG and New Fortress

Given the investment horizon of 90 days Golar LNG Limited is expected to under-perform the New Fortress. But the stock apears to be less risky and, when comparing its historical volatility, Golar LNG Limited is 2.19 times less risky than New Fortress. The stock trades about -0.11 of its potential returns per unit of risk. The New Fortress Energy is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,135  in New Fortress Energy on December 19, 2024 and sell it today you would lose (150.00) from holding New Fortress Energy or give up 13.22% of portfolio value over 90 days.

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

Golar LNG Limited  vs.  New Fortress Energy

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

New Fortress Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Fortress Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Golar LNG and New Fortress

The main advantage of trading using opposite Golar LNG and New Fortress positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golar 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 Golar LNG Limited 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.