Correlation Between Frontline and MPLX LP
Can any of the company-specific risk be diversified away by investing in both Frontline and MPLX LP 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 MPLX LP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontline and MPLX LP, you can compare the effects of market volatilities on Frontline and MPLX LP 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 MPLX LP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontline and MPLX LP.
Diversification Opportunities for Frontline and MPLX LP
Excellent diversification
The 3 months correlation between Frontline and MPLX is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and MPLX LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPLX LP 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 MPLX LP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPLX LP has no effect on the direction of Frontline i.e., Frontline and MPLX LP go up and down completely randomly.
Pair Corralation between Frontline and MPLX LP
Considering the 90-day investment horizon Frontline is expected to under-perform the MPLX LP. In addition to that, Frontline is 2.09 times more volatile than MPLX LP. It trades about -0.05 of its total potential returns per unit of risk. MPLX LP is currently generating about 0.52 per unit of volatility. If you would invest 4,296 in MPLX LP on August 24, 2024 and sell it today you would earn a total of 531.00 from holding MPLX LP or generate 12.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontline vs. MPLX LP
Performance |
| Timeline |
| Frontline |
| MPLX LP |
Frontline and MPLX LP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontline and MPLX LP
The main advantage of trading using opposite Frontline and MPLX LP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontline position performs unexpectedly, MPLX LP 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 MPLX LP will offset losses from the drop in MPLX LP's long position.| Frontline vs. Teekay Tankers | Frontline vs. DHT Holdings | Frontline vs. International Seaways | Frontline vs. Scorpio Tankers |
| MPLX LP vs. ONEOK Inc | MPLX LP vs. Enterprise Products Partners | MPLX LP vs. Energy Transfer LP | MPLX LP vs. Kinder Morgan |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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