Correlation Between American Shipping and Frontline

Can any of the company-specific risk be diversified away by investing in both American Shipping 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 American Shipping and Frontline into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Shipping and Frontline, you can compare the effects of market volatilities on American Shipping 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 American Shipping with a short position of Frontline. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Shipping and Frontline.

Diversification Opportunities for American Shipping and Frontline

-0.1

Correlation Coefficient

American Shipping  Frontline

Good diversification

The 3 months correlation between American and Frontline is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding American Shipping and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and American Shipping 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 American Shipping 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 American Shipping i.e., American Shipping and Frontline go up and down completely randomly.

Pair Corralation between American Shipping and Frontline

Assuming the 90 days trading horizon American Shipping is expected to under-perform the Frontline. In addition to that, American Shipping is 1.14 times more volatile than Frontline. It trades about 0.0 of its total potential returns per unit of risk. Frontline is currently generating about 0.05 per unit of volatility. If you would invest  9,132  in Frontline on September 19, 2024 and sell it today you would earn a total of  6,393  from holding Frontline or generate 70.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

American Shipping  vs.  Frontline

American Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Frontline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontline has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with American Shipping and Frontline

The main advantage of trading using opposite American Shipping and Frontline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Shipping 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.

The idea behind American Shipping and Frontline 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .