Correlation Between Frontline and 2020 Bulkers

Can any of the company-specific risk be diversified away by investing in both Frontline and 2020 Bulkers 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 2020 Bulkers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Frontline and 2020 Bulkers, you can compare the effects of market volatilities on Frontline and 2020 Bulkers 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 2020 Bulkers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontline and 2020 Bulkers.

Diversification Opportunities for Frontline and 2020 Bulkers

0.79

Correlation Coefficient

Frontline  2020 Bulkers

Poor diversification

The 3 months correlation between Frontline and 2020 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and 2020 Bulkers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2020 Bulkers 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 2020 Bulkers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2020 Bulkers has no effect on the direction of Frontline i.e., Frontline and 2020 Bulkers go up and down completely randomly.

Pair Corralation between Frontline and 2020 Bulkers

Assuming the 90 days trading horizon Frontline is expected to generate 1.22 times less return on investment than 2020 Bulkers. In addition to that, Frontline is 1.43 times more volatile than 2020 Bulkers. It trades about 0.09 of its total potential returns per unit of risk. 2020 Bulkers is currently generating about 0.16 per unit of volatility. If you would invest  10,848  in 2020 Bulkers on April 25, 2025 and sell it today you would earn a total of  2,042  from holding 2020 Bulkers or generate 18.82% return on investment over 90 days.

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

Frontline  vs.  2020 Bulkers

Frontline

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontline are ranked lower than 7 (%) 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.

2020 Bulkers

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 2020 Bulkers are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, 2020 Bulkers disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontline and 2020 Bulkers

The main advantage of trading using opposite Frontline and 2020 Bulkers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontline position performs unexpectedly, 2020 Bulkers 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 2020 Bulkers will offset losses from the drop in 2020 Bulkers' long position.

The idea behind Frontline and 2020 Bulkers 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.