Correlation Between Frontier Transport and Bid

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

Diversification Opportunities for Frontier Transport and Bid

0.18

Correlation Coefficient

Frontier Transport  Bid

Average diversification

The 3 months correlation between Frontier and Bid is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and Bid Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bid Corporation 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 Bid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bid Corporation has no effect on the direction of Frontier Transport i.e., Frontier Transport and Bid go up and down completely randomly.

Pair Corralation between Frontier Transport and Bid

Assuming the 90 days trading horizon Frontier Transport Holdings is expected to under-perform the Bid. In addition to that, Frontier Transport is 1.43 times more volatile than Bid Corporation. It trades about -0.08 of its total potential returns per unit of risk. Bid Corporation is currently generating about -0.01 per unit of volatility. If you would invest  4,383,300  in Bid Corporation on December 21, 2024 and sell it today you would lose (51,000) from holding Bid Corporation or give up 1.16% of portfolio value over 90 days.

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

Frontier Transport Holdings  vs.  Bid Corp.

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.

Bid Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bid Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bid is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Frontier Transport and Bid

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

The idea behind Frontier Transport Holdings and Bid Corporation 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.