Correlation Between YPF Sociedad and Frontera Energy

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

By analyzing existing cross correlation between YPF Sociedad Anonima and Frontera Energy Corp, you can compare the effects of market volatilities on YPF Sociedad and Frontera Energy 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 YPF Sociedad with a short position of Frontera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of YPF Sociedad and Frontera Energy.

Diversification Opportunities for YPF Sociedad and Frontera Energy

0.9

Correlation Coefficient

YPF Sociedad  Frontera Energy

Almost no diversification

The 3 months correlation between YPF and Frontera is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding YPF Sociedad Anonima and Frontera Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontera Energy Corp and YPF Sociedad 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 YPF Sociedad Anonima are associated (or correlated) with Frontera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontera Energy Corp has no effect on the direction of YPF Sociedad i.e., YPF Sociedad and Frontera Energy go up and down completely randomly.

Pair Corralation between YPF Sociedad and Frontera Energy

Considering the 90-day investment horizon YPF Sociedad Anonima is expected to generate 1.01 times more return on investment than Frontera Energy. However, YPF Sociedad is 1.01 times more volatile than Frontera Energy Corp. It trades about -0.06 of its potential returns per unit of risk. Frontera Energy Corp is currently generating about -0.09 per unit of risk. If you would invest  4,237  in YPF Sociedad Anonima on December 28, 2024 and sell it today you would lose (500.00) from holding YPF Sociedad Anonima or give up 11.8% of portfolio value over 90 days.

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

YPF Sociedad Anonima  vs.  Frontera Energy Corp

YPF Sociedad Anonima

Risk-Adjusted Performance

Very Weak

Over the last 90 days YPF Sociedad Anonima has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Frontera Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frontera Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental 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.

Pair Trading with YPF Sociedad and Frontera Energy

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

The idea behind YPF Sociedad Anonima and Frontera Energy Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.