Correlation Between Frontier Transport and Trencor
Can any of the company-specific risk be diversified away by investing in both Frontier Transport and Trencor 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 Trencor 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 Trencor, you can compare the effects of market volatilities on Frontier Transport and Trencor 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 Trencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Transport and Trencor.
Diversification Opportunities for Frontier Transport and Trencor
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Frontier and Trencor is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and Trencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trencor 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 Trencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trencor has no effect on the direction of Frontier Transport i.e., Frontier Transport and Trencor go up and down completely randomly.
Pair Corralation between Frontier Transport and Trencor
Assuming the 90 days trading horizon Frontier Transport Holdings is expected to generate 2.29 times more return on investment than Trencor. However, Frontier Transport is 2.29 times more volatile than Trencor. It trades about 0.18 of its potential returns per unit of risk. Trencor is currently generating about 0.1 per unit of risk. If you would invest 69,288 in Frontier Transport Holdings on September 12, 2024 and sell it today you would earn a total of 7,712 from holding Frontier Transport Holdings or generate 11.13% 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. Trencor
Performance |
| Timeline |
| Frontier Transport |
| Trencor |
Frontier Transport and Trencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Transport and Trencor
The main advantage of trading using opposite Frontier Transport and Trencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Transport position performs unexpectedly, Trencor 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 Trencor will offset losses from the drop in Trencor'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 |
| Trencor vs. Sasol Ltd Bee | Trencor vs. Centaur Bci Balanced | Trencor vs. Sabvest Capital | Trencor vs. Growthpoint Properties |
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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