Correlation Between Skanska AB and Flex LNG
Can any of the company-specific risk be diversified away by investing in both Skanska AB 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 Skanska AB and Flex LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skanska AB and Flex LNG, you can compare the effects of market volatilities on Skanska AB 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 Skanska AB with a short position of Flex LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skanska AB and Flex LNG.
Diversification Opportunities for Skanska AB and Flex LNG
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Skanska and Flex is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Skanska AB and Flex LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex LNG and Skanska AB 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 Skanska 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 Skanska AB i.e., Skanska AB and Flex LNG go up and down completely randomly.
Pair Corralation between Skanska AB and Flex LNG
Assuming the 90 days trading horizon Skanska AB is expected to generate 0.68 times more return on investment than Flex LNG. However, Skanska AB is 1.47 times less risky than Flex LNG. It trades about 0.13 of its potential returns per unit of risk. Flex LNG is currently generating about -0.04 per unit of risk. If you would invest 22,900 in Skanska AB on December 2, 2024 and sell it today you would earn a total of 2,580 from holding Skanska AB or generate 11.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Skanska AB vs. Flex LNG
Performance |
Timeline |
Skanska AB |
Flex LNG |
Skanska AB and Flex LNG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Skanska AB and Flex LNG
The main advantage of trading using opposite Skanska AB and Flex LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skanska AB 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 Skanska 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.Flex LNG vs. New Nordic Healthbrands | Flex LNG vs. Svenska Handelsbanken AB | Flex LNG vs. Viva Wine Group | Flex LNG vs. JLT Mobile Computers |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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