Correlation Between Navigator Holdings and Golar LNG

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

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

Diversification Opportunities for Navigator Holdings and Golar LNG

-0.45

Correlation Coefficient

Navigator Holdings  Golar LNG

Very good diversification

The 3 months correlation between Navigator and Golar is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Navigator Holdings and Golar LNG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golar LNG Limited and Navigator Holdings 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 Navigator Holdings are associated (or correlated) with Golar LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golar LNG Limited has no effect on the direction of Navigator Holdings i.e., Navigator Holdings and Golar LNG go up and down completely randomly.

Pair Corralation between Navigator Holdings and Golar LNG

Given the investment horizon of 90 days Navigator Holdings is expected to generate 2.75 times less return on investment than Golar LNG. But when comparing it to its historical volatility, Navigator Holdings is 1.15 times less risky than Golar LNG. It trades about 0.04 of its potential returns per unit of risk. Golar LNG Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,975  in Golar LNG Limited on October 5, 2024 and sell it today you would earn a total of  2,409  from holding Golar LNG Limited or generate 121.97% return on investment over 90 days.

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

Navigator Holdings  vs.  Golar LNG Limited

Navigator Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navigator Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Navigator Holdings is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Golar LNG Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golar LNG Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Golar LNG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Navigator Holdings and Golar LNG

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

The idea behind Navigator Holdings and Golar LNG 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..