Correlation Between Frost Total and Frost Kempner

Can any of the company-specific risk be diversified away by investing in both Frost Total 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 Total 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 Total Return and Frost Kempner Multi Cap, you can compare the effects of market volatilities on Frost Total 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 Total with a short position of Frost Kempner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frost Total and Frost Kempner.

Diversification Opportunities for Frost Total and Frost Kempner

-0.63

Correlation Coefficient

Frost Total  Frost Kempner

Excellent diversification

The 3 months correlation between Frost and Frost is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Frost Total Return 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 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 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 Total i.e., Frost Total and Frost Kempner go up and down completely randomly.

Pair Corralation between Frost Total and Frost Kempner

Assuming the 90 days horizon Frost Total Return is expected to under-perform the Frost Kempner. But the mutual fund apears to be less risky and, when comparing its historical volatility, Frost Total Return is 2.66 times less risky than Frost Kempner. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Frost Kempner Multi Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,210  in Frost Kempner Multi Cap on September 17, 2024 and sell it today you would earn a total of  49.00  from holding Frost Kempner Multi Cap or generate 4.05% return on investment over 90 days.

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

Frost Total Return  vs.  Frost Kempner Multi Cap

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 Kempner Multi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frost Kempner Multi Cap are ranked lower than 8 (%) 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 Total and Frost Kempner

The main advantage of trading using opposite Frost Total and Frost Kempner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frost Total 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 Total Return 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.