Correlation Between Frontline and FLEX LNG
Can any of the company-specific risk be diversified away by investing in both Frontline and FLEX LNG 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 FLEX LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontline and FLEX LNG, you can compare the effects of market volatilities on Frontline and FLEX LNG 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 FLEX LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontline and FLEX LNG.
Diversification Opportunities for Frontline and FLEX LNG
Very poor diversification
The 3 months correlation between Frontline and FLEX is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and FLEX LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLEX LNG 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 FLEX LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLEX LNG has no effect on the direction of Frontline i.e., Frontline and FLEX LNG go up and down completely randomly.
Pair Corralation between Frontline and FLEX LNG
Considering the 90-day investment horizon Frontline is expected to under-perform the FLEX LNG. In addition to that, Frontline is 1.11 times more volatile than FLEX LNG. It trades about -0.05 of its total potential returns per unit of risk. FLEX LNG is currently generating about 0.16 per unit of volatility. If you would invest 2,455 in FLEX LNG on August 24, 2024 and sell it today you would earn a total of 163.00 from holding FLEX LNG or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontline vs. FLEX LNG
Performance |
| Timeline |
| Frontline |
| FLEX LNG |
Frontline and FLEX LNG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontline and FLEX LNG
The main advantage of trading using opposite Frontline and FLEX LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontline position performs unexpectedly, FLEX LNG 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 FLEX LNG will offset losses from the drop in FLEX LNG's long position.| Frontline vs. Teekay Tankers | Frontline vs. DHT Holdings | Frontline vs. International Seaways | Frontline vs. Scorpio Tankers |
| FLEX LNG vs. Frontline | FLEX LNG vs. Torm PLC Class | FLEX LNG vs. Navigator Holdings | FLEX LNG vs. Teekay Tankers |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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