Correlation Between FLEX LNG and Genesis Energy

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

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

Diversification Opportunities for FLEX LNG and Genesis Energy

0.57

Correlation Coefficient

FLEX LNG  Genesis Energy

Very weak diversification

The 3 months correlation between FLEX and Genesis is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding FLEX LNG and Genesis Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Energy 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 Genesis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Energy LP has no effect on the direction of FLEX LNG i.e., FLEX LNG and Genesis Energy go up and down completely randomly.

Pair Corralation between FLEX LNG and Genesis Energy

Given the investment horizon of 90 days FLEX LNG is expected to generate 0.84 times more return on investment than Genesis Energy. However, FLEX LNG is 1.19 times less risky than Genesis Energy. It trades about -0.08 of its potential returns per unit of risk. Genesis Energy LP is currently generating about -0.1 per unit of risk. If you would invest  2,666  in FLEX LNG on August 30, 2024 and sell it today you would lose (265.00) from holding FLEX LNG or give up 9.94% of portfolio value over 90 days.

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

FLEX LNG  vs.  Genesis Energy 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 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.

Genesis Energy LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genesis Energy LP 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 technical and fundamental indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with FLEX LNG and Genesis Energy

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

The idea behind FLEX LNG and Genesis Energy 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.