Correlation Between FLEX LNG and Brooge Holdings

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

By analyzing existing cross correlation between FLEX LNG and Brooge Holdings, you can compare the effects of market volatilities on FLEX LNG and Brooge Holdings 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 Brooge Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLEX LNG and Brooge Holdings.

Diversification Opportunities for FLEX LNG and Brooge Holdings

-0.35

Correlation Coefficient

FLEX LNG  Brooge Holdings

Very good diversification

The 3 months correlation between FLEX and Brooge is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding FLEX LNG and Brooge Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brooge Holdings 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 Brooge Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brooge Holdings has no effect on the direction of FLEX LNG i.e., FLEX LNG and Brooge Holdings go up and down completely randomly.

Pair Corralation between FLEX LNG and Brooge Holdings

Given the investment horizon of 90 days FLEX LNG is expected to under-perform the Brooge Holdings. But the stock apears to be less risky and, when comparing its historical volatility, FLEX LNG is 4.03 times less risky than Brooge Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The Brooge Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Brooge Holdings on August 31, 2024 and sell it today you would earn a total of  31.00  from holding Brooge Holdings or generate 28.7% return on investment over 90 days.

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

FLEX LNG  vs.  Brooge Holdings

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 unfluctuating 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.

Brooge Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brooge Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Brooge Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FLEX LNG and Brooge Holdings

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

The idea behind FLEX LNG and Brooge Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.