Correlation Between Golar LNG and ONEOK

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

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

Diversification Opportunities for Golar LNG and ONEOK

0.38

Correlation Coefficient

Golar LNG  ONEOK

Weak diversification

The 3 months correlation between Golar and ONEOK is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Golar LNG Limited and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc and Golar 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 Golar LNG Limited are associated (or correlated) with ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Golar LNG i.e., Golar LNG and ONEOK go up and down completely randomly.

Pair Corralation between Golar LNG and ONEOK

Given the investment horizon of 90 days Golar LNG is expected to generate 1.01 times less return on investment than ONEOK. In addition to that, Golar LNG is 1.55 times more volatile than ONEOK Inc. It trades about 0.14 of its total potential returns per unit of risk. ONEOK Inc is currently generating about 0.22 per unit of volatility. If you would invest  9,130  in ONEOK Inc on September 2, 2024 and sell it today you would earn a total of  2,230  from holding ONEOK Inc or generate 24.42% return on investment over 90 days.

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

Golar LNG Limited  vs.  ONEOK Inc

Golar LNG Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golar LNG Limited are ranked lower than 10 (%) 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.

ONEOK Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ONEOK Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking signals, ONEOK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golar LNG and ONEOK

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

The idea behind Golar LNG Limited and ONEOK Inc 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..