Correlation Between Frontline and Odfjell B
Can any of the company-specific risk be diversified away by investing in both Frontline and Odfjell B 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 Odfjell B into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontline and Odfjell B, you can compare the effects of market volatilities on Frontline and Odfjell B 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 Odfjell B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontline and Odfjell B.
Diversification Opportunities for Frontline and Odfjell B
Very poor diversification
The 3 months correlation between Frontline and Odfjell is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Odfjell B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell B 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 Odfjell B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell B has no effect on the direction of Frontline i.e., Frontline and Odfjell B go up and down completely randomly.
Pair Corralation between Frontline and Odfjell B
Assuming the 90 days trading horizon Frontline is expected to generate 0.81 times more return on investment than Odfjell B. However, Frontline is 1.23 times less risky than Odfjell B. It trades about -0.13 of its potential returns per unit of risk. Odfjell B is currently generating about -0.18 per unit of risk. If you would invest 23,890 in Frontline on August 28, 2024 and sell it today you would lose (2,730) from holding Frontline or give up 11.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontline vs. Odfjell B
Performance |
| Timeline |
| Frontline |
| Odfjell B |
Frontline and Odfjell B Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontline and Odfjell B
The main advantage of trading using opposite Frontline and Odfjell B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontline position performs unexpectedly, Odfjell B 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 Odfjell B will offset losses from the drop in Odfjell B's long position.The idea behind Frontline and Odfjell B 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.| Odfjell B vs. Dolphin Drilling AS | Odfjell B vs. Pareto Bank ASA | Odfjell B vs. Skue Sparebank | Odfjell B vs. Kraft Bank Asa |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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