Correlation Between Boston Trust and Frontier Mfg

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

By analyzing existing cross correlation between Boston Trust Asset and Frontier Mfg E, you can compare the effects of market volatilities on Boston Trust and Frontier Mfg 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 Boston Trust with a short position of Frontier Mfg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Trust and Frontier Mfg.

Diversification Opportunities for Boston Trust and Frontier Mfg

-0.25

Correlation Coefficient

Boston Trust  Frontier Mfg

Very good diversification

The 3 months correlation between Boston and Frontier is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Boston Trust Asset and Frontier Mfg E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Mfg E and Boston Trust 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 Boston Trust Asset are associated (or correlated) with Frontier Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Mfg E has no effect on the direction of Boston Trust i.e., Boston Trust and Frontier Mfg go up and down completely randomly.

Pair Corralation between Boston Trust and Frontier Mfg

Assuming the 90 days horizon Boston Trust Asset is expected to generate 0.74 times more return on investment than Frontier Mfg. However, Boston Trust Asset is 1.35 times less risky than Frontier Mfg. It trades about 0.17 of its potential returns per unit of risk. Frontier Mfg E is currently generating about 0.01 per unit of risk. If you would invest  6,381  in Boston Trust Asset on September 4, 2024 and sell it today you would earn a total of  330.00  from holding Boston Trust Asset or generate 5.17% return on investment over 90 days.

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

Boston Trust Asset  vs.  Frontier Mfg E

Boston Trust Asset

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Trust Asset are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Boston Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Frontier Mfg E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Mfg E has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Frontier Mfg is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boston Trust and Frontier Mfg

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

The idea behind Boston Trust Asset and Frontier Mfg E 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.