Correlation Between FLEX LNG and Frontline

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

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

Diversification Opportunities for FLEX LNG and Frontline

0.38

Correlation Coefficient

FLEX LNG  Frontline

Weak diversification

The 3 months correlation between FLEX and Frontline is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding FLEX LNG and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and FLEX LNG 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 FLEX LNG 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 FLEX LNG i.e., FLEX LNG and Frontline go up and down completely randomly.

Pair Corralation between FLEX LNG and Frontline

Assuming the 90 days trading horizon FLEX LNG is expected to generate 9.11 times less return on investment than Frontline. But when comparing it to its historical volatility, FLEX LNG is 1.57 times less risky than Frontline. It trades about 0.02 of its potential returns per unit of risk. Frontline is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  15,580  in Frontline on April 22, 2025 and sell it today you would earn a total of  2,945  from holding Frontline or generate 18.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

FLEX LNG  vs.  Frontline

FLEX LNG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FLEX LNG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, FLEX LNG is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Frontline

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontline are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Frontline disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FLEX LNG and Frontline

The main advantage of trading using opposite FLEX LNG and Frontline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLEX LNG 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 FLEX LNG 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.