Correlation Between Frontier Transport and South32
Can any of the company-specific risk be diversified away by investing in both Frontier Transport and South32 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 South32 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 South32, you can compare the effects of market volatilities on Frontier Transport and South32 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 South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Transport and South32.
Diversification Opportunities for Frontier Transport and South32
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Frontier and South32 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and South32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 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 South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 has no effect on the direction of Frontier Transport i.e., Frontier Transport and South32 go up and down completely randomly.
Pair Corralation between Frontier Transport and South32
Assuming the 90 days trading horizon Frontier Transport Holdings is expected to generate 1.61 times more return on investment than South32. However, Frontier Transport is 1.61 times more volatile than South32. It trades about 0.14 of its potential returns per unit of risk. South32 is currently generating about -0.17 per unit of risk. If you would invest 71,028 in Frontier Transport Holdings on September 14, 2024 and sell it today you would earn a total of 5,972 from holding Frontier Transport Holdings or generate 8.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Frontier Transport Holdings vs. South32
Performance |
| Timeline |
| Frontier Transport |
| South32 |
Frontier Transport and South32 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Transport and South32
The main advantage of trading using opposite Frontier Transport and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Transport position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.| Frontier Transport vs. Sasol Ltd Bee | Frontier Transport vs. Centaur Bci Balanced | Frontier Transport vs. Sabvest Capital | Frontier Transport vs. Growthpoint Properties |
| South32 vs. African Rainbow Minerals | South32 vs. Jubilee Platinum | South32 vs. Europa Metals | South32 vs. Sasol Ltd Bee |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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