Correlation Between Frontline and Torm PLC
Can any of the company-specific risk be diversified away by investing in both Frontline and Torm PLC 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 Torm PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontline and Torm PLC Class, you can compare the effects of market volatilities on Frontline and Torm PLC 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 Torm PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontline and Torm PLC.
Diversification Opportunities for Frontline and Torm PLC
Very poor diversification
The 3 months correlation between Frontline and Torm is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Torm PLC Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torm PLC Class 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 Torm PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torm PLC Class has no effect on the direction of Frontline i.e., Frontline and Torm PLC go up and down completely randomly.
Pair Corralation between Frontline and Torm PLC
Considering the 90-day investment horizon Frontline is expected to generate 1.38 times more return on investment than Torm PLC. However, Frontline is 1.38 times more volatile than Torm PLC Class. It trades about -0.05 of its potential returns per unit of risk. Torm PLC Class is currently generating about -0.17 per unit of risk. If you would invest 2,186 in Frontline on November 2, 2024 and sell it today you would lose (438.00) from holding Frontline or give up 20.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontline vs. Torm PLC Class
Performance |
| Timeline |
| Frontline |
| Torm PLC Class |
Frontline and Torm PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontline and Torm PLC
The main advantage of trading using opposite Frontline and Torm PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontline position performs unexpectedly, Torm PLC 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 Torm PLC will offset losses from the drop in Torm PLC's long position.| Frontline vs. Teekay Tankers | Frontline vs. DHT Holdings | Frontline vs. International Seaways | Frontline vs. Scorpio 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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