Correlation Between Genesis Energy and FLEX LNG

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

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

Diversification Opportunities for Genesis Energy and FLEX LNG

0.56

Correlation Coefficient

Genesis Energy  FLEX LNG

Very weak diversification

The 3 months correlation between Genesis and FLEX is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Genesis Energy LP and FLEX LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLEX LNG and Genesis Energy 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 Genesis Energy LP are associated (or correlated) with FLEX LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLEX LNG has no effect on the direction of Genesis Energy i.e., Genesis Energy and FLEX LNG go up and down completely randomly.

Pair Corralation between Genesis Energy and FLEX LNG

Considering the 90-day investment horizon Genesis Energy LP is expected to under-perform the FLEX LNG. In addition to that, Genesis Energy is 1.2 times more volatile than FLEX LNG. It trades about -0.07 of its total potential returns per unit of risk. FLEX LNG is currently generating about -0.06 per unit of volatility. If you would invest  2,612  in FLEX LNG on September 2, 2024 and sell it today you would lose (198.00) from holding FLEX LNG or give up 7.58% of portfolio value over 90 days.

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

Genesis Energy LP  vs.  FLEX LNG

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 latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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.

Pair Trading with Genesis Energy and FLEX LNG

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

The idea behind Genesis Energy LP and FLEX LNG 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.