Correlation Between Cheniere Energy and Cool

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

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

Diversification Opportunities for Cheniere Energy and Cool

-0.71

Correlation Coefficient

Cheniere Energy  Cool

Pay attention - limited upside

The 3 months correlation between Cheniere and Cool is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company 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 Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of Cheniere Energy i.e., Cheniere Energy and Cool go up and down completely randomly.

Pair Corralation between Cheniere Energy and Cool

Considering the 90-day investment horizon Cheniere Energy is expected to generate 0.69 times more return on investment than Cool. However, Cheniere Energy is 1.45 times less risky than Cool. It trades about 0.05 of its potential returns per unit of risk. Cool Company is currently generating about -0.02 per unit of risk. If you would invest  15,986  in Cheniere Energy on September 4, 2024 and sell it today you would earn a total of  6,325  from holding Cheniere Energy or generate 39.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	87.27%
Values	Daily Returns

Cheniere Energy  vs.  Cool Company

Cheniere Energy

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy are ranked lower than 18 (%) 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.

Cool Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cool Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cheniere Energy and Cool

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

The idea behind Cheniere Energy and Cool Company 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.