Correlation Between Frost Total and Frost Low

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

By analyzing existing cross correlation between Frost Total Return and Frost Low Duration, you can compare the effects of market volatilities on Frost Total and Frost Low 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 Total with a short position of Frost Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frost Total and Frost Low.

Diversification Opportunities for Frost Total and Frost Low

0.97

Correlation Coefficient

Frost Total  Frost Low

Almost no diversification

The 3 months correlation between Frost and Frost is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Frost Total Return and Frost Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Low Duration and Frost Total 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 Total Return are associated (or correlated) with Frost Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Low Duration has no effect on the direction of Frost Total i.e., Frost Total and Frost Low go up and down completely randomly.

Pair Corralation between Frost Total and Frost Low

Assuming the 90 days horizon Frost Total Return is expected to generate 1.78 times more return on investment than Frost Low. However, Frost Total is 1.78 times more volatile than Frost Low Duration. It trades about 0.07 of its potential returns per unit of risk. Frost Low Duration is currently generating about 0.04 per unit of risk. If you would invest  975.00  in Frost Total Return on September 16, 2024 and sell it today you would earn a total of  3.00  from holding Frost Total Return or generate 0.31% return on investment over 90 days.

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

Frost Total Return  vs.  Frost Low Duration

Frost Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Frost Low Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frost Low Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Frost Low 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 Total and Frost Low

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

The idea behind Frost Total Return and Frost Low Duration 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.