Correlation Between Frontline and United Maritime

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

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

Diversification Opportunities for Frontline and United Maritime

0.92

Correlation Coefficient

Frontline  United Maritime

Almost no diversification

The 3 months correlation between Frontline and United is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and United Maritime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Maritime 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 United Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Maritime has no effect on the direction of Frontline i.e., Frontline and United Maritime go up and down completely randomly.

Pair Corralation between Frontline and United Maritime

Considering the 90-day investment horizon Frontline is expected to under-perform the United Maritime. In addition to that, Frontline is 1.84 times more volatile than United Maritime. It trades about -0.34 of its total potential returns per unit of risk. United Maritime is currently generating about -0.27 per unit of volatility. If you would invest  209.00  in United Maritime on September 25, 2024 and sell it today you would lose (23.00) from holding United Maritime or give up 11.0% of portfolio value over 90 days.

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

Frontline  vs.  United Maritime

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.

United Maritime

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Maritime has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Frontline and United Maritime

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

The idea behind Frontline and United Maritime 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..