Correlation Between Frontline and Navigator Holdings

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

By analyzing existing cross correlation between Frontline and Navigator Holdings, you can compare the effects of market volatilities on Frontline and Navigator Holdings 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 Navigator Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontline and Navigator Holdings.

Diversification Opportunities for Frontline and Navigator Holdings

0.58

Correlation Coefficient

Frontline  Navigator Holdings

Very weak diversification

The 3 months correlation between Frontline and Navigator is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Navigator Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navigator Holdings 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 Navigator Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navigator Holdings has no effect on the direction of Frontline i.e., Frontline and Navigator Holdings go up and down completely randomly.

Pair Corralation between Frontline and Navigator Holdings

Considering the 90-day investment horizon Frontline is expected to under-perform the Navigator Holdings. In addition to that, Frontline is 1.87 times more volatile than Navigator Holdings. It trades about -0.16 of its total potential returns per unit of risk. Navigator Holdings is currently generating about -0.01 per unit of volatility. If you would invest  1,594  in Navigator Holdings on September 2, 2024 and sell it today you would lose (28.00) from holding Navigator Holdings or give up 1.76% of portfolio value over 90 days.

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

Frontline  vs.  Navigator Holdings

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. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Navigator Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navigator Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Navigator Holdings is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Frontline and Navigator Holdings

The main advantage of trading using opposite Frontline and Navigator Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontline position performs unexpectedly, Navigator Holdings 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 Navigator Holdings will offset losses from the drop in Navigator Holdings' long position.

The idea behind Frontline and Navigator Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.