Correlation Between Frost Low and Frost Total

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

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

Diversification Opportunities for Frost Low and Frost Total

0.81

Correlation Coefficient

Frost Low  Frost Total

Very poor diversification

The 3 months correlation between Frost and Frost is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Frost Low Duration and Frost Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Total Return and Frost Low 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 Low Duration are associated (or correlated) with Frost Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Total Return has no effect on the direction of Frost Low i.e., Frost Low and Frost Total go up and down completely randomly.

Pair Corralation between Frost Low and Frost Total

Assuming the 90 days horizon Frost Low is expected to generate 1.58 times less return on investment than Frost Total. But when comparing it to its historical volatility, Frost Low Duration is 2.14 times less risky than Frost Total. It trades about 0.33 of its potential returns per unit of risk. Frost Total Return is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  959.00  in Frost Total Return on December 5, 2024 and sell it today you would earn a total of  25.00  from holding Frost Total Return or generate 2.61% return on investment over 90 days.

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

Frost Low Duration  vs.  Frost Total Return

Frost Low Duration

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frost Low Duration are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Frost Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Frost Total Return

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Frost Total Return are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Frost Low and Frost Total

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

The idea behind Frost Low Duration and Frost Total Return 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 Transaction History module to view history of all your transactions and understand their impact on performance.