Correlation Between EnLink Midstream and Golar LNG

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

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

Diversification Opportunities for EnLink Midstream and Golar LNG

0.38

Correlation Coefficient

EnLink Midstream  Golar LNG

Weak diversification

The 3 months correlation between EnLink and Golar is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding EnLink Midstream LLC 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 EnLink Midstream 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 EnLink Midstream LLC 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 EnLink Midstream i.e., EnLink Midstream and Golar LNG go up and down completely randomly.

Pair Corralation between EnLink Midstream and Golar LNG

Given the investment horizon of 90 days EnLink Midstream is expected to generate 11.99 times less return on investment than Golar LNG. But when comparing it to its historical volatility, EnLink Midstream LLC is 2.45 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 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,144  in Golar LNG Limited on September 12, 2024 and sell it today you would earn a total of  1,210  from holding Golar LNG Limited or generate 38.49% return on investment over 90 days.

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

EnLink Midstream LLC  vs.  Golar LNG Limited

EnLink Midstream LLC

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EnLink Midstream LLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, EnLink Midstream is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Golar LNG Limited

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Golar LNG Limited are ranked lower than 16 (%) 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 EnLink Midstream and Golar LNG

The main advantage of trading using opposite EnLink Midstream and Golar LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EnLink Midstream 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 EnLink Midstream LLC 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.