Correlation Between Frontier Transport and African Rainbow
Can any of the company-specific risk be diversified away by investing in both Frontier Transport and African Rainbow 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 African Rainbow 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 African Rainbow Minerals, you can compare the effects of market volatilities on Frontier Transport and African Rainbow 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 African Rainbow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Transport and African Rainbow.
Diversification Opportunities for Frontier Transport and African Rainbow
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Frontier and African is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and African Rainbow Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Rainbow Minerals 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 African Rainbow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Rainbow Minerals has no effect on the direction of Frontier Transport i.e., Frontier Transport and African Rainbow go up and down completely randomly.
Pair Corralation between Frontier Transport and African Rainbow
Assuming the 90 days trading horizon Frontier Transport Holdings is expected to generate 1.71 times more return on investment than African Rainbow. However, Frontier Transport is 1.71 times more volatile than African Rainbow Minerals. It trades about 0.06 of its potential returns per unit of risk. African Rainbow Minerals is currently generating about -0.03 per unit of risk. If you would invest 35,375 in Frontier Transport Holdings on September 5, 2024 and sell it today you would earn a total of 41,625 from holding Frontier Transport Holdings or generate 117.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontier Transport Holdings vs. African Rainbow Minerals
Performance |
| Timeline |
| Frontier Transport |
| African Rainbow Minerals |
Frontier Transport and African Rainbow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Transport and African Rainbow
The main advantage of trading using opposite Frontier Transport and African Rainbow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Transport position performs unexpectedly, African Rainbow 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 African Rainbow will offset losses from the drop in African Rainbow's long position.| Frontier Transport vs. Sasol Ltd Bee | Frontier Transport vs. Centaur Bci Balanced | Frontier Transport vs. Growthpoint Properties | Frontier Transport vs. Coronation Global Equity |
| African Rainbow vs. AfroCentric Investment Corp | African Rainbow vs. Reinet Investments SCA | African Rainbow vs. Frontier Transport Holdings | African Rainbow vs. Zeder Investments |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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