Correlation Between CA Sales and Frontier Transport

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

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

Diversification Opportunities for CA Sales and Frontier Transport

-0.2

Correlation Coefficient

CA Sales  Frontier Transport

Good diversification

The 3 months correlation between CAA and Frontier is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding CA Sales 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 CA Sales 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 CA Sales 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 CA Sales i.e., CA Sales and Frontier Transport go up and down completely randomly.

Pair Corralation between CA Sales and Frontier Transport

Assuming the 90 days trading horizon CA Sales Holdings is expected to generate 0.47 times more return on investment than Frontier Transport. However, CA Sales Holdings is 2.13 times less risky than Frontier Transport. It trades about 0.12 of its potential returns per unit of risk. Frontier Transport Holdings is currently generating about 0.03 per unit of risk. If you would invest  145,000  in CA Sales Holdings on September 4, 2024 and sell it today you would earn a total of  22,200  from holding CA Sales Holdings or generate 15.31% return on investment over 90 days.

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

CA Sales Holdings  vs.  Frontier Transport Holdings

CA Sales Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CA Sales Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, CA Sales exhibited solid returns over the last few months and may actually be approaching a breakup point.

Frontier Transport

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Transport Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Frontier Transport may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CA Sales and Frontier Transport

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

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.