Correlation Between Frontier Transport and Netcare
Can any of the company-specific risk be diversified away by investing in both Frontier Transport and Netcare 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 Netcare 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 Netcare, you can compare the effects of market volatilities on Frontier Transport and Netcare 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 Netcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Transport and Netcare.
Diversification Opportunities for Frontier Transport and Netcare
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Frontier and Netcare is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and Netcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcare 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 Netcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcare has no effect on the direction of Frontier Transport i.e., Frontier Transport and Netcare go up and down completely randomly.
Pair Corralation between Frontier Transport and Netcare
Assuming the 90 days trading horizon Frontier Transport Holdings is expected to generate 2.78 times more return on investment than Netcare. However, Frontier Transport is 2.78 times more volatile than Netcare. It trades about 0.07 of its potential returns per unit of risk. Netcare is currently generating about 0.01 per unit of risk. If you would invest 35,021 in Frontier Transport Holdings on September 1, 2024 and sell it today you would earn a total of 37,979 from holding Frontier Transport Holdings or generate 108.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Frontier Transport Holdings vs. Netcare
Performance |
| Timeline |
| Frontier Transport |
| Netcare |
Frontier Transport and Netcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Transport and Netcare
The main advantage of trading using opposite Frontier Transport and Netcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Transport position performs unexpectedly, Netcare 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 Netcare will offset losses from the drop in Netcare's long position.| Frontier Transport vs. Sasol Ltd Bee | Frontier Transport vs. Growthpoint Properties | Frontier Transport vs. AfricaRhodium ETF | Frontier Transport vs. CoreShares Preference Share |
| Netcare vs. HomeChoice Investments | Netcare vs. We Buy Cars | Netcare vs. Ascendis Health | Netcare vs. Astral Foods |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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