Correlation Between Aspen Pharmacare and Frontier Transport

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

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

Diversification Opportunities for Aspen Pharmacare and Frontier Transport

0.33

Correlation Coefficient

Aspen Pharmacare  Frontier Transport

Weak diversification

The 3 months correlation between Aspen and Frontier is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Pharmacare 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 Aspen Pharmacare 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 Aspen Pharmacare 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 Aspen Pharmacare i.e., Aspen Pharmacare and Frontier Transport go up and down completely randomly.

Pair Corralation between Aspen Pharmacare and Frontier Transport

Assuming the 90 days trading horizon Aspen Pharmacare Holdings is expected to under-perform the Frontier Transport. But the stock apears to be less risky and, when comparing its historical volatility, Aspen Pharmacare Holdings is 2.84 times less risky than Frontier Transport. The stock trades about -0.16 of its potential returns per unit of risk. The Frontier Transport Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  74,893  in Frontier Transport Holdings on October 10, 2024 and sell it today you would earn a total of  1,907  from holding Frontier Transport Holdings or generate 2.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Aspen Pharmacare Holdings  vs.  Frontier Transport Holdings

Aspen Pharmacare Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Pharmacare Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 February 2025.

Pair Trading with Aspen Pharmacare and Frontier Transport

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

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.