Correlation Between Frontline and Global Partners

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

By analyzing existing cross correlation between Frontline and Global Partners LP, you can compare the effects of market volatilities on Frontline and Global Partners 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 Frontline with a short position of Global Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontline and Global Partners.

Diversification Opportunities for Frontline and Global Partners

0.41

Correlation Coefficient

Frontline  Global Partners

Very weak diversification

The 3 months correlation between Frontline and Global is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP and Frontline 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 Frontline are associated (or correlated) with Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Frontline i.e., Frontline and Global Partners go up and down completely randomly.

Pair Corralation between Frontline and Global Partners

Considering the 90-day investment horizon Frontline is expected to generate 19.95 times more return on investment than Global Partners. However, Frontline is 19.95 times more volatile than Global Partners LP. It trades about 0.06 of its potential returns per unit of risk. Global Partners LP is currently generating about 0.25 per unit of risk. If you would invest  1,371  in Frontline on December 30, 2024 and sell it today you would earn a total of  126.00  from holding Frontline or generate 9.19% return on investment over 90 days.

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

Frontline  vs.  Global Partners LP

Frontline

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Frontline are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Frontline displayed solid returns over the last few months and may actually be approaching a breakup point.

Global Partners LP

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Frontline and Global Partners

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

The idea behind Frontline and Global Partners LP 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.