Correlation Between Ford and Frontier Communications
Can any of the company-specific risk be diversified away by investing in both Ford and Frontier Communications 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 Ford and Frontier Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Frontier Communications Parent, you can compare the effects of market volatilities on Ford and Frontier Communications 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 Ford with a short position of Frontier Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Frontier Communications.
Diversification Opportunities for Ford and Frontier Communications
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Frontier is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Frontier Communications Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Communications and Ford 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 Ford Motor are associated (or correlated) with Frontier Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Communications has no effect on the direction of Ford i.e., Ford and Frontier Communications go up and down completely randomly.
Pair Corralation between Ford and Frontier Communications
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Frontier Communications. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.52 times less risky than Frontier Communications. The stock trades about 0.0 of its potential returns per unit of risk. The Frontier Communications Parent is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,551 in Frontier Communications Parent on August 24, 2024 and sell it today you would earn a total of 929.00 from holding Frontier Communications Parent or generate 36.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Frontier Communications Parent
Performance |
| Timeline |
| Ford Motor |
| Frontier Communications |
Ford and Frontier Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Frontier Communications
The main advantage of trading using opposite Ford and Frontier Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Frontier Communications 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 Frontier Communications will offset losses from the drop in Frontier Communications' long position.The idea behind Ford Motor and Frontier Communications Parent 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.| Frontier Communications vs. Cable One | Frontier Communications vs. Charter Communications | Frontier Communications vs. Liberty Broadband Srs | Frontier Communications vs. ATN International |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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