Correlation Between Enterprise Products and Frontline

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

By analyzing existing cross correlation between Enterprise Products Partners and Frontline, you can compare the effects of market volatilities on Enterprise Products and Frontline 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 Enterprise Products with a short position of Frontline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Products and Frontline.

Diversification Opportunities for Enterprise Products and Frontline

-0.5

Correlation Coefficient

Enterprise Products  Frontline

Very good diversification

The 3 months correlation between Enterprise and Frontline is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Products Partners and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and Enterprise Products 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 Enterprise Products Partners are associated (or correlated) with Frontline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontline has no effect on the direction of Enterprise Products i.e., Enterprise Products and Frontline go up and down completely randomly.

Pair Corralation between Enterprise Products and Frontline

Considering the 90-day investment horizon Enterprise Products Partners is expected to generate 0.32 times more return on investment than Frontline. However, Enterprise Products Partners is 3.15 times less risky than Frontline. It trades about 0.26 of its potential returns per unit of risk. Frontline is currently generating about -0.06 per unit of risk. If you would invest  2,853  in Enterprise Products Partners on October 25, 2024 and sell it today you would earn a total of  527.00  from holding Enterprise Products Partners or generate 18.47% return on investment over 90 days.

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

Enterprise Products Partners  vs.  Frontline

Enterprise Products

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Products Partners are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Enterprise Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

Frontline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Enterprise Products and Frontline

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

The idea behind Enterprise Products Partners and Frontline 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.