Correlation Between Frontline and TC Energy

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

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

Diversification Opportunities for Frontline and TC Energy

0.14

Correlation Coefficient

Frontline  TC Energy

Average diversification

The 3 months correlation between Frontline and TRP is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Frontline i.e., Frontline and TC Energy go up and down completely randomly.

Pair Corralation between Frontline and TC Energy

Considering the 90-day investment horizon Frontline is expected to generate 2.81 times more return on investment than TC Energy. However, Frontline is 2.81 times more volatile than TC Energy Corp. It trades about 0.06 of its potential returns per unit of risk. TC Energy Corp is currently generating about 0.05 per unit of risk. If you would invest  1,371  in Frontline on December 28, 2024 and sell it today you would earn a total of  120.00  from holding Frontline or generate 8.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Frontline  vs.  TC Energy Corp

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.

TC Energy Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, TC Energy is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Frontline and TC Energy

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

The idea behind Frontline and TC Energy Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.