Correlation Between Cheniere Energy and Brooge Energy

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

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

Diversification Opportunities for Cheniere Energy and Brooge Energy

-0.51

Correlation Coefficient

Cheniere Energy  Brooge Energy

Excellent diversification

The 3 months correlation between Cheniere and Brooge is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy and Brooge Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brooge Energy Limited and Cheniere Energy 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 Cheniere Energy are associated (or correlated) with Brooge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brooge Energy Limited has no effect on the direction of Cheniere Energy i.e., Cheniere Energy and Brooge Energy go up and down completely randomly.

Pair Corralation between Cheniere Energy and Brooge Energy

Considering the 90-day investment horizon Cheniere Energy is expected to generate 99.06 times less return on investment than Brooge Energy. But when comparing it to its historical volatility, Cheniere Energy is 113.52 times less risky than Brooge Energy. It trades about 0.21 of its potential returns per unit of risk. Brooge Energy Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.39  in Brooge Energy Limited on August 30, 2024 and sell it today you would lose (0.28) from holding Brooge Energy Limited or give up 71.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	61.9%
Values	Daily Returns

Cheniere Energy  vs.  Brooge Energy Limited

Cheniere Energy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Brooge Energy Limited

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brooge Energy Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Brooge Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheniere Energy and Brooge Energy

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

The idea behind Cheniere Energy and Brooge Energy Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.