Correlation Between Blue Label and Frontier Transport

Can any of the company-specific risk be diversified away by investing in both Blue Label 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 Blue Label and Frontier Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Blue Label Telecoms and Frontier Transport Holdings, you can compare the effects of market volatilities on Blue Label 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 Blue Label with a short position of Frontier Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Label and Frontier Transport.

Diversification Opportunities for Blue Label and Frontier Transport

0.44

Correlation Coefficient

Blue Label  Frontier Transport

Very weak diversification

The 3 months correlation between Blue and Frontier is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Frontier Transport Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Transport and Blue Label 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 Blue Label Telecoms 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 Blue Label i.e., Blue Label and Frontier Transport go up and down completely randomly.

Pair Corralation between Blue Label and Frontier Transport

Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 0.35 times more return on investment than Frontier Transport. However, Blue Label Telecoms is 2.88 times less risky than Frontier Transport. It trades about 0.08 of its potential returns per unit of risk. Frontier Transport Holdings is currently generating about 0.01 per unit of risk. If you would invest  49,300  in Blue Label Telecoms on September 1, 2024 and sell it today you would earn a total of  3,900  from holding Blue Label Telecoms or generate 7.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Blue Label Telecoms  vs.  Frontier Transport Holdings

Blue Label Telecoms

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Label Telecoms are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Blue Label may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Frontier Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Transport Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Frontier Transport is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Blue Label and Frontier Transport

The main advantage of trading using opposite Blue Label and Frontier Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Label 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.

The idea behind Blue Label Telecoms and Frontier Transport Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.