Correlation Between Frontier Transport and AECI

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

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

Diversification Opportunities for Frontier Transport and AECI

0.04

Correlation Coefficient

Frontier Transport  AECI

Significant diversification

The 3 months correlation between Frontier and AECI is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and AECI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECI and Frontier Transport 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 Frontier Transport Holdings are associated (or correlated) with AECI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECI has no effect on the direction of Frontier Transport i.e., Frontier Transport and AECI go up and down completely randomly.

Pair Corralation between Frontier Transport and AECI

Assuming the 90 days trading horizon Frontier Transport Holdings is expected to generate 4.91 times more return on investment than AECI. However, Frontier Transport is 4.91 times more volatile than AECI. It trades about 0.03 of its potential returns per unit of risk. AECI is currently generating about -0.2 per unit of risk. If you would invest  73,800  in Frontier Transport Holdings on September 4, 2024 and sell it today you would earn a total of  1,200  from holding Frontier Transport Holdings or generate 1.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Frontier Transport Holdings  vs.  AECI

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.

AECI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AECI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Frontier Transport and AECI

The main advantage of trading using opposite Frontier Transport and AECI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Transport position performs unexpectedly, AECI 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 AECI will offset losses from the drop in AECI's long position.

The idea behind Frontier Transport Holdings and AECI 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.