Correlation Between Frontline and Martin Midstream

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

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

Diversification Opportunities for Frontline and Martin Midstream

-0.46

Correlation Coefficient

Frontline  Martin Midstream

Very good diversification

The 3 months correlation between Frontline and Martin is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Martin Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Midstream Partners 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 Martin Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Midstream Partners has no effect on the direction of Frontline i.e., Frontline and Martin Midstream go up and down completely randomly.

Pair Corralation between Frontline and Martin Midstream

Considering the 90-day investment horizon Frontline is expected to under-perform the Martin Midstream. In addition to that, Frontline is 15.26 times more volatile than Martin Midstream Partners. It trades about -0.26 of its total potential returns per unit of risk. Martin Midstream Partners is currently generating about 0.1 per unit of volatility. If you would invest  399.00  in Martin Midstream Partners on September 27, 2024 and sell it today you would earn a total of  2.00  from holding Martin Midstream Partners or generate 0.5% return on investment over 90 days.

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

Frontline  vs.  Martin Midstream Partners

Frontline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Martin Midstream Partners

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Midstream Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Martin Midstream may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Frontline and Martin Midstream

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

The idea behind Frontline and Martin Midstream Partners 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.