Correlation Between Frontier Transport and MTN

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

Diversification Opportunities for Frontier Transport and MTN

0.21

Correlation Coefficient

Frontier Transport  MTN

Modest diversification

The 3 months correlation between Frontier and MTN is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and MTN Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group 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 MTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of Frontier Transport i.e., Frontier Transport and MTN go up and down completely randomly.

Pair Corralation between Frontier Transport and MTN

Assuming the 90 days trading horizon Frontier Transport Holdings is expected to generate 1.85 times more return on investment than MTN. However, Frontier Transport is 1.85 times more volatile than MTN Group. It trades about 0.07 of its potential returns per unit of risk. MTN Group is currently generating about -0.04 per unit of risk. If you would invest  38,741  in Frontier Transport Holdings on September 12, 2024 and sell it today you would earn a total of  38,259  from holding Frontier Transport Holdings or generate 98.76% return on investment over 90 days.

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

Frontier Transport Holdings  vs.  MTN Group

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 weak technical and fundamental indicators, Frontier Transport may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MTN Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group 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 MTN

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

The idea behind Frontier Transport Holdings and MTN Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.