Correlation Between Frost Growth and Frost Kempner

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

By analyzing existing cross correlation between Frost Growth Equity and Frost Kempner Multi Cap, you can compare the effects of market volatilities on Frost Growth and Frost Kempner 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 Frost Growth with a short position of Frost Kempner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frost Growth and Frost Kempner.

Diversification Opportunities for Frost Growth and Frost Kempner

-0.45

Correlation Coefficient

Frost Growth  Frost Kempner

Very good diversification

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

Pair Corralation between Frost Growth and Frost Kempner

Assuming the 90 days horizon Frost Growth Equity is expected to under-perform the Frost Kempner. In addition to that, Frost Growth is 8.26 times more volatile than Frost Kempner Multi Cap. It trades about -0.16 of its total potential returns per unit of risk. Frost Kempner Multi Cap is currently generating about 0.05 per unit of volatility. If you would invest  1,252  in Frost Kempner Multi Cap on September 17, 2024 and sell it today you would earn a total of  6.00  from holding Frost Kempner Multi Cap or generate 0.48% return on investment over 90 days.

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

Frost Growth Equity  vs.  Frost Kempner Multi Cap

Frost Growth Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frost Growth Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Frost Kempner Multi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frost Kempner Multi Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Frost Kempner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Frost Growth and Frost Kempner

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

The idea behind Frost Growth Equity and Frost Kempner Multi Cap 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.