Correlation Between ONEOK and Frontline

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

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

Diversification Opportunities for ONEOK and Frontline

0.14

Correlation Coefficient

ONEOK  Frontline

Average diversification

The 3 months correlation between ONEOK and Frontline is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding ONEOK Inc and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and ONEOK 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 ONEOK Inc 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 ONEOK i.e., ONEOK and Frontline go up and down completely randomly.

Pair Corralation between ONEOK and Frontline

Considering the 90-day investment horizon ONEOK Inc is expected to under-perform the Frontline. But the stock apears to be less risky and, when comparing its historical volatility, ONEOK Inc is 2.11 times less risky than Frontline. The stock trades about 0.0 of its potential returns per unit of risk. The Frontline is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,371  in Frontline on December 29, 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	100.0%
Values	Daily Returns

ONEOK Inc  vs.  Frontline

ONEOK Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ONEOK Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, ONEOK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with ONEOK and Frontline

The main advantage of trading using opposite ONEOK and Frontline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ONEOK 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 ONEOK Inc 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.