Correlation Between FLEX LNG and Energy Transfer

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

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

Diversification Opportunities for FLEX LNG and Energy Transfer

-0.66

Correlation Coefficient

FLEX LNG  Energy Transfer

Excellent diversification

The 3 months correlation between FLEX and Energy is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding FLEX LNG and Energy Transfer LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Transfer LP and FLEX LNG 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 FLEX LNG are associated (or correlated) with Energy Transfer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Transfer LP has no effect on the direction of FLEX LNG i.e., FLEX LNG and Energy Transfer go up and down completely randomly.

Pair Corralation between FLEX LNG and Energy Transfer

Given the investment horizon of 90 days FLEX LNG is expected to under-perform the Energy Transfer. In addition to that, FLEX LNG is 1.34 times more volatile than Energy Transfer LP. It trades about -0.04 of its total potential returns per unit of risk. Energy Transfer LP is currently generating about 0.14 per unit of volatility. If you would invest  1,236  in Energy Transfer LP on January 24, 2024 and sell it today you would earn a total of  347.00  from holding Energy Transfer LP or generate 28.07% return on investment over 90 days.

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

FLEX LNG  vs.  Energy Transfer LP

FLEX LNG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FLEX LNG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Energy Transfer LP

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Energy Transfer unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FLEX LNG and Energy Transfer

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

The idea behind FLEX LNG and Energy Transfer LP 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.