Correlation Between Frontier Transport and Aspen Pharmacare

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

Diversification Opportunities for Frontier Transport and Aspen Pharmacare

-0.47

Correlation Coefficient

Frontier Transport  Aspen Pharmacare

Very good diversification

The 3 months correlation between Frontier and Aspen is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and Aspen Pharmacare Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Pharmacare Holdings 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 Aspen Pharmacare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Pharmacare Holdings has no effect on the direction of Frontier Transport i.e., Frontier Transport and Aspen Pharmacare go up and down completely randomly.

Pair Corralation between Frontier Transport and Aspen Pharmacare

Assuming the 90 days trading horizon Frontier Transport Holdings is expected to under-perform the Aspen Pharmacare. But the stock apears to be less risky and, when comparing its historical volatility, Frontier Transport Holdings is 1.27 times less risky than Aspen Pharmacare. The stock trades about -0.1 of its potential returns per unit of risk. The Aspen Pharmacare Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,662,800  in Aspen Pharmacare Holdings on December 28, 2024 and sell it today you would earn a total of  13,100  from holding Aspen Pharmacare Holdings or generate 0.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Frontier Transport Holdings  vs.  Aspen Pharmacare Holdings

Frontier Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frontier Transport Holdings 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.

Aspen Pharmacare Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Pharmacare Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Aspen Pharmacare is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Frontier Transport and Aspen Pharmacare

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

The idea behind Frontier Transport Holdings and Aspen Pharmacare 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.