Correlation Between Frontline and ADS Maritime

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

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

Diversification Opportunities for Frontline and ADS Maritime

0.18

Correlation Coefficient

Frontline  ADS Maritime

Average diversification

The 3 months correlation between Frontline and ADS is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and ADS Maritime Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADS Maritime Holding 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 ADS Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADS Maritime Holding has no effect on the direction of Frontline i.e., Frontline and ADS Maritime go up and down completely randomly.

Pair Corralation between Frontline and ADS Maritime

Assuming the 90 days trading horizon Frontline is expected to generate 1.04 times more return on investment than ADS Maritime. However, Frontline is 1.04 times more volatile than ADS Maritime Holding. It trades about 0.09 of its potential returns per unit of risk. ADS Maritime Holding is currently generating about 0.04 per unit of risk. If you would invest  16,401  in Frontline on April 24, 2025 and sell it today you would earn a total of  2,109  from holding Frontline or generate 12.86% return on investment over 90 days.

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

Frontline  vs.  ADS Maritime Holding

Frontline

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontline are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Frontline disclosed solid returns over the last few months and may actually be approaching a breakup point.

ADS Maritime Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADS Maritime Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, ADS Maritime is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Frontline and ADS Maritime

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

The idea behind Frontline and ADS Maritime Holding 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.