Correlation Between Stolt Nielsen and Frontline

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

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

Diversification Opportunities for Stolt Nielsen and Frontline

0.78

Correlation Coefficient

Stolt Nielsen  Frontline

Poor diversification

The 3 months correlation between Stolt and Frontline is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Stolt Nielsen Limited and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and Stolt Nielsen 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 Stolt Nielsen Limited 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 Stolt Nielsen i.e., Stolt Nielsen and Frontline go up and down completely randomly.

Pair Corralation between Stolt Nielsen and Frontline

Assuming the 90 days trading horizon Stolt Nielsen Limited is expected to generate 0.86 times more return on investment than Frontline. However, Stolt Nielsen Limited is 1.16 times less risky than Frontline. It trades about -0.2 of its potential returns per unit of risk. Frontline is currently generating about -0.24 per unit of risk. If you would invest  37,596  in Stolt Nielsen Limited on September 20, 2024 and sell it today you would lose (9,496) from holding Stolt Nielsen Limited or give up 25.26% of portfolio value over 90 days.

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

Stolt Nielsen Limited  vs.  Frontline

Stolt Nielsen Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stolt Nielsen Limited 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 forward 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 Stolt Nielsen and Frontline

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

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.