Correlation Between Frontline and Pyxis Tankers

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

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

Diversification Opportunities for Frontline and Pyxis Tankers

0.78

Correlation Coefficient

Frontline  Pyxis Tankers

Poor diversification

The 3 months correlation between Frontline and Pyxis is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Pyxis Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyxis Tankers 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 Pyxis Tankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyxis Tankers has no effect on the direction of Frontline i.e., Frontline and Pyxis Tankers go up and down completely randomly.

Pair Corralation between Frontline and Pyxis Tankers

Considering the 90-day investment horizon Frontline is expected to generate 0.19 times more return on investment than Pyxis Tankers. However, Frontline is 5.32 times less risky than Pyxis Tankers. It trades about -0.24 of its potential returns per unit of risk. Pyxis Tankers is currently generating about -0.17 per unit of risk. If you would invest  2,184  in Frontline on September 21, 2024 and sell it today you would lose (846.00) from holding Frontline or give up 38.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	59.38%
Values	Daily Returns

Frontline  vs.  Pyxis Tankers

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 conflicting 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.

Pyxis Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pyxis Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Frontline and Pyxis Tankers

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

The idea behind Frontline and Pyxis Tankers 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.