Correlation Between Indutrade and Flex LNG

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

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

Diversification Opportunities for Indutrade and Flex LNG

0.19

Correlation Coefficient

Indutrade  Flex LNG

Average diversification

The 3 months correlation between Indutrade and Flex is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Flex LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex LNG and Indutrade 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 Indutrade AB are associated (or correlated) with Flex LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flex LNG has no effect on the direction of Indutrade i.e., Indutrade and Flex LNG go up and down completely randomly.

Pair Corralation between Indutrade and Flex LNG

Assuming the 90 days trading horizon Indutrade AB is expected to generate 0.83 times more return on investment than Flex LNG. However, Indutrade AB is 1.2 times less risky than Flex LNG. It trades about 0.03 of its potential returns per unit of risk. Flex LNG is currently generating about -0.05 per unit of risk. If you would invest  27,700  in Indutrade AB on December 29, 2024 and sell it today you would earn a total of  680.00  from holding Indutrade AB or generate 2.45% return on investment over 90 days.

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

Indutrade AB  vs.  Flex LNG

Indutrade AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indutrade AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Indutrade is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Indutrade and Flex LNG

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

The idea behind Indutrade AB and Flex LNG 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.