Correlation Between Odfjell B and Frontline

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

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

Diversification Opportunities for Odfjell B and Frontline

0.9

Correlation Coefficient

Odfjell B  Frontline

Almost no diversification

The 3 months correlation between Odfjell and Frontline is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell B and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and Odfjell B 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 Odfjell B 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 Odfjell B i.e., Odfjell B and Frontline go up and down completely randomly.

Pair Corralation between Odfjell B and Frontline

Assuming the 90 days trading horizon Odfjell B is expected to generate 1.23 times less return on investment than Frontline. But when comparing it to its historical volatility, Odfjell B is 1.15 times less risky than Frontline. It trades about 0.05 of its potential returns per unit of risk. Frontline is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,132  in Frontline on September 19, 2024 and sell it today you would earn a total of  6,133  from holding Frontline or generate 67.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Odfjell B  vs.  Frontline

Odfjell B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Odfjell B 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 essential 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.

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 Odfjell B and Frontline

The main advantage of trading using opposite Odfjell B and Frontline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Odfjell B 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 Odfjell B 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 Stocks Directory module to find actively traded stocks across global markets.