Correlation Between Scorpio Tankers and Cheniere Energy

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

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

Diversification Opportunities for Scorpio Tankers and Cheniere Energy

-0.82

Correlation Coefficient

Scorpio Tankers  Cheniere Energy

Pay attention - limited upside

The 3 months correlation between Scorpio and Cheniere is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Scorpio Tankers and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners and Scorpio Tankers 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 Scorpio Tankers are associated (or correlated) with Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of Scorpio Tankers i.e., Scorpio Tankers and Cheniere Energy go up and down completely randomly.

Pair Corralation between Scorpio Tankers and Cheniere Energy

Given the investment horizon of 90 days Scorpio Tankers is expected to under-perform the Cheniere Energy. In addition to that, Scorpio Tankers is 1.25 times more volatile than Cheniere Energy Partners. It trades about -0.04 of its total potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.04 per unit of volatility. If you would invest  4,846  in Cheniere Energy Partners on September 19, 2024 and sell it today you would earn a total of  563.00  from holding Cheniere Energy Partners or generate 11.62% return on investment over 90 days.

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

Scorpio Tankers  vs.  Cheniere Energy Partners

Scorpio Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scorpio Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Cheniere Energy Partners

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scorpio Tankers and Cheniere Energy

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

The idea behind Scorpio Tankers and Cheniere Energy Partners 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 Global Correlations module to find global opportunities by holding instruments from different markets.