Correlation Between Frontline and Aker Solutions

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

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

Diversification Opportunities for Frontline and Aker Solutions

0.59

Correlation Coefficient

Frontline  Aker Solutions

Very weak diversification

The 3 months correlation between Frontline and Aker is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Aker Solutions ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Solutions ASA 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 Aker Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Solutions ASA has no effect on the direction of Frontline i.e., Frontline and Aker Solutions go up and down completely randomly.

Pair Corralation between Frontline and Aker Solutions

Assuming the 90 days trading horizon Frontline is expected to generate 1.14 times more return on investment than Aker Solutions. However, Frontline is 1.14 times more volatile than Aker Solutions ASA. It trades about 0.09 of its potential returns per unit of risk. Aker Solutions ASA is currently generating about 0.09 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	Weak
Accuracy	100.0%
Values	Daily Returns

Frontline  vs.  Aker Solutions ASA

Frontline

Risk-Adjusted Performance

Modest

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 conflicting basic indicators, Frontline disclosed solid returns over the last few months and may actually be approaching a breakup point.

Aker Solutions ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Solutions ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Aker Solutions disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontline and Aker Solutions

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

The idea behind Frontline and Aker Solutions ASA 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.