Correlation Between Cheniere Energy and Dorian LPG

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

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

Diversification Opportunities for Cheniere Energy and Dorian LPG

-0.84

Correlation Coefficient

Cheniere Energy  Dorian LPG

Pay attention - limited upside

The 3 months correlation between Cheniere and Dorian is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy and Dorian LPG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorian LPG 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 Dorian LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorian LPG has no effect on the direction of Cheniere Energy i.e., Cheniere Energy and Dorian LPG go up and down completely randomly.

Pair Corralation between Cheniere Energy and Dorian LPG

Considering the 90-day investment horizon Cheniere Energy is expected to generate 0.74 times more return on investment than Dorian LPG. However, Cheniere Energy is 1.35 times less risky than Dorian LPG. It trades about 0.17 of its potential returns per unit of risk. Dorian LPG is currently generating about -0.24 per unit of risk. If you would invest  17,939  in Cheniere Energy on September 30, 2024 and sell it today you would earn a total of  3,109  from holding Cheniere Energy or generate 17.33% return on investment over 90 days.

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

Cheniere Energy  vs.  Dorian LPG

Cheniere Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy are ranked lower than 13 (%) 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.

Dorian LPG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dorian LPG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cheniere Energy and Dorian LPG

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

The idea behind Cheniere Energy and Dorian LPG 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.