Correlation Between ONEOK and FLEX LNG

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

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

Diversification Opportunities for ONEOK and FLEX LNG

-0.19

Correlation Coefficient

ONEOK  FLEX LNG

Good diversification

The 3 months correlation between ONEOK and FLEX is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ONEOK Inc and FLEX LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLEX LNG and ONEOK 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 ONEOK Inc 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 ONEOK i.e., ONEOK and FLEX LNG go up and down completely randomly.

Pair Corralation between ONEOK and FLEX LNG

Considering the 90-day investment horizon ONEOK Inc is expected to generate 0.91 times more return on investment than FLEX LNG. However, ONEOK Inc is 1.1 times less risky than FLEX LNG. It trades about 0.22 of its potential returns per unit of risk. FLEX LNG is currently generating about -0.06 per unit of risk. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ONEOK Inc  vs.  FLEX LNG

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.

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 ONEOK and FLEX LNG

The main advantage of trading using opposite ONEOK and FLEX LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ONEOK 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 ONEOK Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.