Correlation Between Frontier Group and Gol Linhas

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

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

Diversification Opportunities for Frontier Group and Gol Linhas

0.83

Correlation Coefficient

Frontier Group  Gol Linhas

Very poor diversification

The 3 months correlation between Frontier and Gol is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Group Holdings and Gol Linhas Aereas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gol Linhas Aereas and Frontier Group 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 Group Holdings are associated (or correlated) with Gol Linhas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gol Linhas Aereas has no effect on the direction of Frontier Group i.e., Frontier Group and Gol Linhas go up and down completely randomly.

Pair Corralation between Frontier Group and Gol Linhas

If you would invest  364.00  in Frontier Group Holdings on September 4, 2024 and sell it today you would earn a total of  249.00  from holding Frontier Group Holdings or generate 68.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.59%
Values	Daily Returns

Frontier Group Holdings  vs.  Gol Linhas Aereas

Frontier Group Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Group Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Frontier Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gol Linhas Aereas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gol Linhas Aereas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Gol Linhas is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Frontier Group and Gol Linhas

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

The idea behind Frontier Group Holdings and Gol Linhas Aereas 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.