Correlation Between Dorian LPG and Frontline
Can any of the company-specific risk be diversified away by investing in both Dorian LPG and Frontline 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 Dorian LPG and Frontline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dorian LPG and Frontline, you can compare the effects of market volatilities on Dorian LPG and Frontline 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 Dorian LPG with a short position of Frontline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorian LPG and Frontline.
Diversification Opportunities for Dorian LPG and Frontline
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dorian and Frontline is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dorian LPG and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and Dorian LPG 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 Dorian LPG are associated (or correlated) with Frontline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontline has no effect on the direction of Dorian LPG i.e., Dorian LPG and Frontline go up and down completely randomly.
Pair Corralation between Dorian LPG and Frontline
Considering the 90-day investment horizon Dorian LPG is expected to under-perform the Frontline. But the stock apears to be less risky and, when comparing its historical volatility, Dorian LPG is 1.02 times less risky than Frontline. The stock trades about -0.31 of its potential returns per unit of risk. The Frontline is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,976 in Frontline on August 27, 2024 and sell it today you would lose (21.00) from holding Frontline or give up 1.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dorian LPG vs. Frontline
Performance |
| Timeline |
| Dorian LPG |
| Frontline |
Dorian LPG and Frontline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dorian LPG and Frontline
The main advantage of trading using opposite Dorian LPG and Frontline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorian LPG position performs unexpectedly, Frontline 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 Frontline will offset losses from the drop in Frontline's long position.| Dorian LPG vs. DHT Holdings | Dorian LPG vs. Scorpio Tankers | Dorian LPG vs. Teekay Tankers | Dorian LPG vs. Torm PLC Class |
| 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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