Correlation Between Safe Bulkers and Frontline

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

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

Diversification Opportunities for Safe Bulkers and Frontline

0.92

Correlation Coefficient

Safe Bulkers  Frontline

Almost no diversification

The 3 months correlation between Safe and Frontline is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and Safe Bulkers 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 Safe Bulkers 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 Safe Bulkers i.e., Safe Bulkers and Frontline go up and down completely randomly.

Pair Corralation between Safe Bulkers and Frontline

Allowing for the 90-day total investment horizon Safe Bulkers is expected to generate 1.53 times less return on investment than Frontline. But when comparing it to its historical volatility, Safe Bulkers is 1.39 times less risky than Frontline. It trades about 0.04 of its potential returns per unit of risk. Frontline is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  887.00  in Frontline on September 24, 2024 and sell it today you would earn a total of  451.00  from holding Frontline or generate 50.85% return on investment over 90 days.

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

Safe Bulkers  vs.  Frontline

Safe Bulkers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe Bulkers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Safe Bulkers and Frontline

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