Correlation Between Scorpio Tankers and Frontline

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

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

Diversification Opportunities for Scorpio Tankers and Frontline

0.25

Correlation Coefficient

Scorpio Tankers  Frontline

Modest diversification

The 3 months correlation between Scorpio and Frontline is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Scorpio Tankers and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and Scorpio Tankers 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 Scorpio Tankers 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 Scorpio Tankers i.e., Scorpio Tankers and Frontline go up and down completely randomly.

Pair Corralation between Scorpio Tankers and Frontline

Given the investment horizon of 90 days Scorpio Tankers is expected to under-perform the Frontline. But the stock apears to be less risky and, when comparing its historical volatility, Scorpio Tankers is 1.3 times less risky than Frontline. The stock trades about -0.12 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 30, 2024 and sell it today you would earn a total of  126.00  from holding Frontline or generate 9.19% return on investment over 90 days.

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

Scorpio Tankers  vs.  Frontline

Scorpio Tankers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scorpio Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Scorpio Tankers and Frontline

The main advantage of trading using opposite Scorpio Tankers and Frontline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scorpio Tankers 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 Scorpio Tankers 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.