Correlation Between Frontline and Golden Ocean

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

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

Diversification Opportunities for Frontline and Golden Ocean

0.45

Correlation Coefficient

Frontline  Golden Ocean

Very weak diversification

The 3 months correlation between Frontline and Golden is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Golden Ocean Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Ocean Group 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 Golden Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Ocean Group has no effect on the direction of Frontline i.e., Frontline and Golden Ocean go up and down completely randomly.

Pair Corralation between Frontline and Golden Ocean

Assuming the 90 days trading horizon Frontline is expected to generate 1.29 times more return on investment than Golden Ocean. However, Frontline is 1.29 times more volatile than Golden Ocean Group. It trades about 0.1 of its potential returns per unit of risk. Golden Ocean Group is currently generating about 0.06 per unit of risk. If you would invest  16,040  in Frontline on April 23, 2025 and sell it today you would earn a total of  2,485  from holding Frontline or generate 15.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Frontline  vs.  Golden Ocean Group

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.

Golden Ocean Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Ocean Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Golden Ocean may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Frontline and Golden Ocean

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

The idea behind Frontline and Golden Ocean Group 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.