Correlation Between Mowi ASA and Frontline

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

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

Diversification Opportunities for Mowi ASA and Frontline

0.43

Correlation Coefficient

Mowi ASA  Frontline

Very weak diversification

The 3 months correlation between Mowi and Frontline is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Mowi ASA and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and Mowi ASA 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 Mowi ASA are associated (or correlated) with Frontline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontline has no effect on the direction of Mowi ASA i.e., Mowi ASA and Frontline go up and down completely randomly.

Pair Corralation between Mowi ASA and Frontline

Assuming the 90 days trading horizon Mowi ASA is expected to generate 0.39 times more return on investment than Frontline. However, Mowi ASA is 2.59 times less risky than Frontline. It trades about 0.12 of its potential returns per unit of risk. Frontline is currently generating about 0.02 per unit of risk. If you would invest  19,855  in Mowi ASA on November 29, 2024 and sell it today you would earn a total of  1,715  from holding Mowi ASA or generate 8.64% return on investment over 90 days.

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

Mowi ASA  vs.  Frontline

Mowi ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mowi ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Mowi ASA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Frontline

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Frontline are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Frontline is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mowi ASA and Frontline

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

The idea behind Mowi ASA and Frontline 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.