Correlation Between Frontline and Storebrand ASA
Can any of the company-specific risk be diversified away by investing in both Frontline and Storebrand ASA 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 Storebrand ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontline and Storebrand ASA, you can compare the effects of market volatilities on Frontline and Storebrand ASA 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 Storebrand ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontline and Storebrand ASA.
Diversification Opportunities for Frontline and Storebrand ASA
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Frontline and Storebrand is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Storebrand ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storebrand ASA 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 Storebrand ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storebrand ASA has no effect on the direction of Frontline i.e., Frontline and Storebrand ASA go up and down completely randomly.
Pair Corralation between Frontline and Storebrand ASA
Assuming the 90 days trading horizon Frontline is expected to generate 1.92 times less return on investment than Storebrand ASA. In addition to that, Frontline is 1.94 times more volatile than Storebrand ASA. It trades about 0.04 of its total potential returns per unit of risk. Storebrand ASA is currently generating about 0.14 per unit of volatility. If you would invest 8,630 in Storebrand ASA on August 25, 2024 and sell it today you would earn a total of 3,700 from holding Storebrand ASA or generate 42.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontline vs. Storebrand ASA
Performance |
| Timeline |
| Frontline |
| Storebrand ASA |
Frontline and Storebrand ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontline and Storebrand ASA
The main advantage of trading using opposite Frontline and Storebrand ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontline position performs unexpectedly, Storebrand ASA 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 Storebrand ASA will offset losses from the drop in Storebrand ASA's long position.The idea behind Frontline and Storebrand ASA 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.| Storebrand ASA vs. DnB ASA | Storebrand ASA vs. Gjensidige Forsikring ASA | Storebrand ASA vs. Orkla ASA | Storebrand ASA vs. Telenor 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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