Correlation Between Frontline and Golden Ocean
Can any of the company-specific risk be diversified away by investing in both Frontline and Golden Ocean 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 Frontline and Golden Ocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontline and Golden Ocean Group, you can compare the effects of market volatilities on Frontline and Golden Ocean 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 Frontline with a short position of Golden Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontline and Golden Ocean.
Diversification Opportunities for Frontline and Golden Ocean
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Frontline and Golden is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Golden Ocean Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Ocean Group and Frontline 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 Frontline are associated (or correlated) with Golden Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Ocean Group has no effect on the direction of Frontline i.e., Frontline and Golden Ocean go up and down completely randomly.
Pair Corralation between Frontline and Golden Ocean
Assuming the 90 days trading horizon Frontline is expected to generate 1.2 times more return on investment than Golden Ocean. However, Frontline is 1.2 times more volatile than Golden Ocean Group. It trades about 0.06 of its potential returns per unit of risk. Golden Ocean Group is currently generating about 0.03 per unit of risk. If you would invest 11,013 in Frontline on October 24, 2024 and sell it today you would earn a total of 7,987 from holding Frontline or generate 72.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontline vs. Golden Ocean Group
Performance |
| Timeline |
| Frontline |
| Golden Ocean Group |
Frontline and Golden Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontline and Golden Ocean
The main advantage of trading using opposite Frontline and Golden Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontline position performs unexpectedly, Golden Ocean 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 Golden Ocean will offset losses from the drop in Golden Ocean's long position.| Frontline vs. Golden Ocean Group | Frontline vs. BW LPG | Frontline vs. FLEX LNG | Frontline vs. Avance Gas Holding |
| Golden Ocean vs. Frontline | Golden Ocean vs. BW LPG | Golden Ocean vs. Jinhui Shipping and | Golden Ocean vs. FLEX LNG |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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