Correlation Between Frost Total and Mairs Power

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

Diversification Opportunities for Frost Total and Mairs Power

0.75

Correlation Coefficient

Frost Total  Mairs Power

Poor diversification

The 3 months correlation between Frost and Mairs is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Frost Total Return and Mairs Power Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mairs Power Growth 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 Mairs Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mairs Power Growth has no effect on the direction of Frost Total i.e., Frost Total and Mairs Power go up and down completely randomly.

Pair Corralation between Frost Total and Mairs Power

Assuming the 90 days horizon Frost Total is expected to generate 7.9 times less return on investment than Mairs Power. But when comparing it to its historical volatility, Frost Total Return is 3.78 times less risky than Mairs Power. It trades about 0.01 of its potential returns per unit of risk. Mairs Power Growth is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17,583  in Mairs Power Growth on October 26, 2024 and sell it today you would earn a total of  122.00  from holding Mairs Power Growth or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Frost Total Return  vs.  Mairs Power Growth

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 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.

Mairs Power Growth

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mairs Power Growth are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Mairs Power 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 Mairs Power

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

The idea behind Frost Total Return and Mairs Power Growth 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.