Correlation Between Awilco LNG and Hafnia

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

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

Diversification Opportunities for Awilco LNG and Hafnia

0.81

Correlation Coefficient

Awilco LNG  Hafnia

Very poor diversification

The 3 months correlation between Awilco and Hafnia is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Awilco LNG ASA and Hafnia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia and Awilco 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 Awilco LNG ASA are associated (or correlated) with Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia has no effect on the direction of Awilco LNG i.e., Awilco LNG and Hafnia go up and down completely randomly.

Pair Corralation between Awilco LNG and Hafnia

Assuming the 90 days trading horizon Awilco LNG ASA is expected to under-perform the Hafnia. In addition to that, Awilco LNG is 2.07 times more volatile than Hafnia. It trades about -0.17 of its total potential returns per unit of risk. Hafnia is currently generating about -0.15 per unit of volatility. If you would invest  7,384  in Hafnia on September 16, 2024 and sell it today you would lose (1,464) from holding Hafnia or give up 19.83% of portfolio value over 90 days.

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

Awilco LNG ASA  vs.  Hafnia

Awilco LNG ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Awilco LNG ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Hafnia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Awilco LNG and Hafnia

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

The idea behind Awilco LNG ASA and Hafnia 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.