Correlation Between Frontier Transport and Astral Foods

Can any of the company-specific risk be diversified away by investing in both Frontier Transport and Astral Foods 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 Astral Foods 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 Astral Foods, you can compare the effects of market volatilities on Frontier Transport and Astral Foods 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 Astral Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Transport and Astral Foods.

Diversification Opportunities for Frontier Transport and Astral Foods

-0.05

Correlation Coefficient

Frontier Transport  Astral Foods

Good diversification

The 3 months correlation between Frontier and Astral is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and Astral Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods 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 Astral Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astral Foods has no effect on the direction of Frontier Transport i.e., Frontier Transport and Astral Foods go up and down completely randomly.

Pair Corralation between Frontier Transport and Astral Foods

Assuming the 90 days trading horizon Frontier Transport Holdings is expected to generate 3.7 times more return on investment than Astral Foods. However, Frontier Transport is 3.7 times more volatile than Astral Foods. It trades about 0.04 of its potential returns per unit of risk. Astral Foods is currently generating about 0.11 per unit of risk. If you would invest  73,444  in Frontier Transport Holdings on September 13, 2024 and sell it today you would earn a total of  3,556  from holding Frontier Transport Holdings or generate 4.84% return on investment over 90 days.

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

Frontier Transport Holdings  vs.  Astral Foods

Frontier Transport

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Transport Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Frontier Transport may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Astral Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Astral Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Frontier Transport and Astral Foods

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

The idea behind Frontier Transport Holdings and Astral Foods 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.