Correlation Between Frontline and Electromagnetic Geoservices

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

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

Diversification Opportunities for Frontline and Electromagnetic Geoservices

-0.45

Correlation Coefficient

Frontline  Electromagnetic Geoservices

Very good diversification

The 3 months correlation between Frontline and Electromagnetic is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Frontline and Electromagnetic Geoservices AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromagnetic Geoservices and Frontline 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 Frontline are associated (or correlated) with Electromagnetic Geoservices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromagnetic Geoservices has no effect on the direction of Frontline i.e., Frontline and Electromagnetic Geoservices go up and down completely randomly.

Pair Corralation between Frontline and Electromagnetic Geoservices

Assuming the 90 days trading horizon Frontline is expected to generate 0.55 times more return on investment than Electromagnetic Geoservices. However, Frontline is 1.82 times less risky than Electromagnetic Geoservices. It trades about 0.11 of its potential returns per unit of risk. Electromagnetic Geoservices ASA is currently generating about 0.05 per unit of risk. If you would invest  22,986  in Frontline on February 24, 2024 and sell it today you would earn a total of  7,034  from holding Frontline or generate 30.6% return on investment over 90 days.

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

Frontline  vs.  Electromagnetic Geoservices AS

Frontline

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontline are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Frontline disclosed solid returns over the last few months and may actually be approaching a breakup point.

Electromagnetic Geoservices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electromagnetic Geoservices ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Frontline and Electromagnetic Geoservices

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

The idea behind Frontline and Electromagnetic Geoservices ASA 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.