Correlation Between Avance Gas and Frontline
Can any of the company-specific risk be diversified away by investing in both Avance Gas and Frontline 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 Avance Gas and Frontline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avance Gas Holding and Frontline, you can compare the effects of market volatilities on Avance Gas and Frontline 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 Avance Gas with a short position of Frontline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avance Gas and Frontline.
Diversification Opportunities for Avance Gas and Frontline
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Avance and Frontline is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Avance Gas Holding and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and Avance Gas 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 Avance Gas Holding are associated (or correlated) with Frontline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontline has no effect on the direction of Avance Gas i.e., Avance Gas and Frontline go up and down completely randomly.
Pair Corralation between Avance Gas and Frontline
Assuming the 90 days trading horizon Avance Gas Holding is expected to under-perform the Frontline. In addition to that, Avance Gas is 1.26 times more volatile than Frontline. It trades about -0.12 of its total potential returns per unit of risk. Frontline is currently generating about -0.09 per unit of volatility. If you would invest 28,119 in Frontline on August 28, 2024 and sell it today you would lose (6,959) from holding Frontline or give up 24.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avance Gas Holding vs. Frontline
Performance |
| Timeline |
| Avance Gas Holding |
| Frontline |
Avance Gas and Frontline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avance Gas and Frontline
The main advantage of trading using opposite Avance Gas and Frontline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avance Gas position performs unexpectedly, Frontline 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 Frontline will offset losses from the drop in Frontline's long position.The idea behind Avance Gas Holding and Frontline 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.Check out your portfolio center.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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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