Correlation Between Frost Low and Frost Growth
Can any of the company-specific risk be diversified away by investing in both Frost Low and Frost Growth 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 Frost Low and Frost Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frost Low Duration and Frost Growth Equity, you can compare the effects of market volatilities on Frost Low and Frost Growth 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 Frost Low with a short position of Frost Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frost Low and Frost Growth.
Diversification Opportunities for Frost Low and Frost Growth
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Frost and Frost is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Frost Low Duration and Frost Growth Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Growth Equity and Frost Low 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 Frost Low Duration are associated (or correlated) with Frost Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Growth Equity has no effect on the direction of Frost Low i.e., Frost Low and Frost Growth go up and down completely randomly.
Pair Corralation between Frost Low and Frost Growth
Assuming the 90 days horizon Frost Low is expected to generate 1.03 times less return on investment than Frost Growth. But when comparing it to its historical volatility, Frost Low Duration is 12.33 times less risky than Frost Growth. It trades about 0.17 of its potential returns per unit of risk. Frost Growth Equity is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,427 in Frost Growth Equity on September 1, 2024 and sell it today you would earn a total of 48.00 from holding Frost Growth Equity or generate 3.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Frost Low Duration vs. Frost Growth Equity
Performance |
| Timeline |
| Frost Low Duration |
| Frost Growth Equity |
Frost Low and Frost Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frost Low and Frost Growth
The main advantage of trading using opposite Frost Low and Frost Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frost Low position performs unexpectedly, Frost Growth 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 Frost Growth will offset losses from the drop in Frost Growth's long position.| Frost Low vs. Frost Growth Equity | Frost Low vs. Frost Total Return | Frost Low vs. Frost Total Return | Frost Low vs. Fidelity Advisor Freedom |
| Frost Growth vs. Frost Kempner Multi Cap | Frost Growth vs. Frost Low Duration | Frost Growth vs. Frost Total Return | Frost Growth vs. Frost Growth Equity |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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