Correlation Between Frontier Transport and ABSA Bank
Can any of the company-specific risk be diversified away by investing in both Frontier Transport and ABSA Bank 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 Frontier Transport and ABSA Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontier Transport Holdings and ABSA Bank Limited, you can compare the effects of market volatilities on Frontier Transport and ABSA Bank 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 Frontier Transport with a short position of ABSA Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Transport and ABSA Bank.
Diversification Opportunities for Frontier Transport and ABSA Bank
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Frontier and ABSA is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and ABSA Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABSA Bank Limited and Frontier Transport 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 Frontier Transport Holdings are associated (or correlated) with ABSA Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABSA Bank Limited has no effect on the direction of Frontier Transport i.e., Frontier Transport and ABSA Bank go up and down completely randomly.
Pair Corralation between Frontier Transport and ABSA Bank
Assuming the 90 days trading horizon Frontier Transport Holdings is expected to generate 2.88 times more return on investment than ABSA Bank. However, Frontier Transport is 2.88 times more volatile than ABSA Bank Limited. It trades about 0.01 of its potential returns per unit of risk. ABSA Bank Limited is currently generating about -0.12 per unit of risk. If you would invest 76,900 in Frontier Transport Holdings on November 3, 2024 and sell it today you would earn a total of 0.00 from holding Frontier Transport Holdings or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontier Transport Holdings vs. ABSA Bank Limited
Performance |
| Timeline |
| Frontier Transport |
| ABSA Bank Limited |
Frontier Transport and ABSA Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Transport and ABSA Bank
The main advantage of trading using opposite Frontier Transport and ABSA Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Transport position performs unexpectedly, ABSA Bank 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 ABSA Bank will offset losses from the drop in ABSA Bank's long position.| Frontier Transport vs. Trematon Capital Investments | Frontier Transport vs. Kumba Iron Ore | Frontier Transport vs. Lesaka Technologies | Frontier Transport vs. Deneb Investments |
| ABSA Bank vs. Zeder Investments | ABSA Bank vs. African Media Entertainment | ABSA Bank vs. Astral Foods | ABSA Bank vs. Kap Industrial Holdings |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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