Correlation Between Shoprite Holdings and Frontier Transport
Can any of the company-specific risk be diversified away by investing in both Shoprite Holdings and Frontier Transport 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 Shoprite Holdings and Frontier Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shoprite Holdings and Frontier Transport Holdings, you can compare the effects of market volatilities on Shoprite Holdings and Frontier Transport 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 Shoprite Holdings with a short position of Frontier Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoprite Holdings and Frontier Transport.
Diversification Opportunities for Shoprite Holdings and Frontier Transport
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shoprite and Frontier is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings and Frontier Transport Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Transport and Shoprite Holdings 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 Shoprite Holdings are associated (or correlated) with Frontier Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Transport has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Frontier Transport go up and down completely randomly.
Pair Corralation between Shoprite Holdings and Frontier Transport
Assuming the 90 days trading horizon Shoprite Holdings is expected to generate 0.31 times more return on investment than Frontier Transport. However, Shoprite Holdings is 3.2 times less risky than Frontier Transport. It trades about 0.22 of its potential returns per unit of risk. Frontier Transport Holdings is currently generating about -0.08 per unit of risk. If you would invest 2,823,900 in Shoprite Holdings on August 24, 2024 and sell it today you would earn a total of 227,100 from holding Shoprite Holdings or generate 8.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Shoprite Holdings vs. Frontier Transport Holdings
Performance |
| Timeline |
| Shoprite Holdings |
| Frontier Transport |
Shoprite Holdings and Frontier Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shoprite Holdings and Frontier Transport
The main advantage of trading using opposite Shoprite Holdings and Frontier Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoprite Holdings position performs unexpectedly, Frontier Transport 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 Transport will offset losses from the drop in Frontier Transport's long position.| Shoprite Holdings vs. Capitec Bank Holdings | Shoprite Holdings vs. ABSA Bank Limited | Shoprite Holdings vs. Frontier Transport Holdings | Shoprite Holdings vs. Advtech |
| Frontier Transport vs. Centaur Bci Balanced | Frontier Transport vs. Growthpoint Properties | Frontier Transport vs. Bowler Metcalf | Frontier Transport vs. Shoprite Holdings |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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