Correlation Between BW Offshore and Frontier Group

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

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

Diversification Opportunities for BW Offshore and Frontier Group

-0.42

Correlation Coefficient

BW Offshore  Frontier Group

Very good diversification

The 3 months correlation between BWOFY and Frontier is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore Limited and Frontier Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Group Holdings and BW Offshore 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 BW Offshore Limited are associated (or correlated) with Frontier Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Group Holdings has no effect on the direction of BW Offshore i.e., BW Offshore and Frontier Group go up and down completely randomly.

Pair Corralation between BW Offshore and Frontier Group

Assuming the 90 days horizon BW Offshore Limited is expected to generate 0.32 times more return on investment than Frontier Group. However, BW Offshore Limited is 3.12 times less risky than Frontier Group. It trades about -0.04 of its potential returns per unit of risk. Frontier Group Holdings is currently generating about -0.05 per unit of risk. If you would invest  524.00  in BW Offshore Limited on December 20, 2024 and sell it today you would lose (23.00) from holding BW Offshore Limited or give up 4.39% of portfolio value over 90 days.

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

BW Offshore Limited  vs.  Frontier Group Holdings

BW Offshore Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BW Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BW Offshore is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Frontier Group Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BW Offshore and Frontier Group

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

The idea behind BW Offshore Limited and Frontier Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.