Correlation Between Frost Total and Leader Short

Can any of the company-specific risk be diversified away by investing in both Frost Total and Leader Short 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 Leader Short 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 Leader Short Term Bond, you can compare the effects of market volatilities on Frost Total and Leader Short 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 Leader Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frost Total and Leader Short.

Diversification Opportunities for Frost Total and Leader Short

0.55

Correlation Coefficient

Frost Total  Leader Short

Very weak diversification

The 3 months correlation between Frost and Leader is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Frost Total Return and Leader Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Short Term 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 Leader Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leader Short Term has no effect on the direction of Frost Total i.e., Frost Total and Leader Short go up and down completely randomly.

Pair Corralation between Frost Total and Leader Short

Assuming the 90 days horizon Frost Total is expected to generate 1.08 times less return on investment than Leader Short. In addition to that, Frost Total is 1.13 times more volatile than Leader Short Term Bond. It trades about 0.16 of its total potential returns per unit of risk. Leader Short Term Bond is currently generating about 0.19 per unit of volatility. If you would invest  804.00  in Leader Short Term Bond on December 20, 2024 and sell it today you would earn a total of  19.00  from holding Leader Short Term Bond or generate 2.36% return on investment over 90 days.

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

Frost Total Return  vs.  Leader Short Term Bond

Frost Total Return

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frost Total Return are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Frost Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Leader Short Term

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leader Short Term Bond are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Leader Short 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 Leader Short

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

The idea behind Frost Total Return and Leader Short Term Bond 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.