Correlation Between Frontline and Plains GP

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

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

Diversification Opportunities for Frontline and Plains GP

-0.12

Correlation Coefficient

Frontline  Plains GP

Good diversification

The 3 months correlation between Frontline and Plains is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Plains GP Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plains GP 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 Plains GP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plains GP Holdings has no effect on the direction of Frontline i.e., Frontline and Plains GP go up and down completely randomly.

Pair Corralation between Frontline and Plains GP

Considering the 90-day investment horizon Frontline is expected to under-perform the Plains GP. In addition to that, Frontline is 2.18 times more volatile than Plains GP Holdings. It trades about -0.16 of its total potential returns per unit of risk. Plains GP Holdings is currently generating about 0.08 per unit of volatility. If you would invest  1,842  in Plains GP Holdings on September 4, 2024 and sell it today you would earn a total of  118.00  from holding Plains GP Holdings or generate 6.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Frontline  vs.  Plains GP 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.

Plains GP Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Plains GP Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Plains GP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Frontline and Plains GP

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

The idea behind Frontline and Plains GP 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 Stocks Directory module to find actively traded stocks across global markets.