Correlation Between Yara International and Frontline

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

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

Diversification Opportunities for Yara International and Frontline

0.38

Correlation Coefficient

Yara International  Frontline

Weak diversification

The 3 months correlation between Yara and Frontline is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and Yara International 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 Yara International 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 Yara International i.e., Yara International and Frontline go up and down completely randomly.

Pair Corralation between Yara International and Frontline

Assuming the 90 days trading horizon Yara International ASA is expected to generate 0.5 times more return on investment than Frontline. However, Yara International ASA is 2.01 times less risky than Frontline. It trades about 0.05 of its potential returns per unit of risk. Frontline is currently generating about 0.02 per unit of risk. If you would invest  30,080  in Yara International ASA on December 30, 2024 and sell it today you would earn a total of  1,340  from holding Yara International ASA or generate 4.45% return on investment over 90 days.

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

Yara International ASA  vs.  Frontline

Yara International ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yara International ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Yara International is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 Yara International and Frontline

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

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.