Correlation Between Vodacom and Frontier Transport
Can any of the company-specific risk be diversified away by investing in both Vodacom 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 Vodacom and Frontier Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vodacom Group and Frontier Transport Holdings, you can compare the effects of market volatilities on Vodacom 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 Vodacom with a short position of Frontier Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodacom and Frontier Transport.
Diversification Opportunities for Vodacom and Frontier Transport
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vodacom and Frontier is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vodacom Group and Frontier Transport Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Transport and Vodacom 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 Vodacom Group 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 Vodacom i.e., Vodacom and Frontier Transport go up and down completely randomly.
Pair Corralation between Vodacom and Frontier Transport
Assuming the 90 days trading horizon Vodacom is expected to generate 1.3 times less return on investment than Frontier Transport. But when comparing it to its historical volatility, Vodacom Group is 1.89 times less risky than Frontier Transport. It trades about 0.06 of its potential returns per unit of risk. Frontier Transport Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 70,545 in Frontier Transport Holdings on October 22, 2024 and sell it today you would earn a total of 1,955 from holding Frontier Transport Holdings or generate 2.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.5% |
| Values | Daily Returns |
Vodacom Group vs. Frontier Transport Holdings
Performance |
| Timeline |
| Vodacom Group |
| Frontier Transport |
Vodacom and Frontier Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vodacom and Frontier Transport
The main advantage of trading using opposite Vodacom and Frontier Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodacom 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.| Vodacom vs. Frontier Transport Holdings | Vodacom vs. Zeder Investments | Vodacom vs. Kumba Iron Ore | Vodacom vs. Ascendis Health |
| Frontier Transport vs. British American Tobacco | Frontier Transport vs. Brimstone Investment | Frontier Transport vs. Blue Label Telecoms | Frontier Transport vs. HomeChoice Investments |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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