Correlation Between Lumen Technologies and Frontier Communications
Can any of the company-specific risk be diversified away by investing in both Lumen Technologies and Frontier Communications 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 Lumen Technologies and Frontier Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumen Technologies and Frontier Communications Parent, you can compare the effects of market volatilities on Lumen Technologies and Frontier Communications 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 Lumen Technologies with a short position of Frontier Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumen Technologies and Frontier Communications.
Diversification Opportunities for Lumen Technologies and Frontier Communications
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lumen and Frontier is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies and Frontier Communications Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Communications and Lumen Technologies 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 Lumen Technologies are associated (or correlated) with Frontier Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Communications has no effect on the direction of Lumen Technologies i.e., Lumen Technologies and Frontier Communications go up and down completely randomly.
Pair Corralation between Lumen Technologies and Frontier Communications
Given the investment horizon of 90 days Lumen Technologies is expected to under-perform the Frontier Communications. In addition to that, Lumen Technologies is 7.98 times more volatile than Frontier Communications Parent. It trades about -0.59 of its total potential returns per unit of risk. Frontier Communications Parent is currently generating about 0.07 per unit of volatility. If you would invest 3,439 in Frontier Communications Parent on September 12, 2024 and sell it today you would earn a total of 24.00 from holding Frontier Communications Parent or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lumen Technologies vs. Frontier Communications Parent
Performance |
| Timeline |
| Lumen Technologies |
| Frontier Communications |
Lumen Technologies and Frontier Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumen Technologies and Frontier Communications
The main advantage of trading using opposite Lumen Technologies and Frontier Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumen Technologies position performs unexpectedly, Frontier Communications 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 Frontier Communications will offset losses from the drop in Frontier Communications' long position.| Lumen Technologies vs. Victory Integrity Smallmid Cap | Lumen Technologies vs. Hilton Worldwide Holdings | Lumen Technologies vs. NVIDIA | Lumen Technologies vs. JPMorgan Chase Co |
| Frontier Communications vs. Cable One | Frontier Communications vs. Charter Communications | Frontier Communications vs. Liberty Broadband Srs | Frontier Communications vs. ATN International |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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