Correlation Between Frontier Transport and Lighthouse Capital

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

Diversification Opportunities for Frontier Transport and Lighthouse Capital

-0.03

Correlation Coefficient

Frontier Transport  Lighthouse Capital

Good diversification

The 3 months correlation between Frontier and Lighthouse is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and Lighthouse Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lighthouse Capital 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 Lighthouse Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lighthouse Capital has no effect on the direction of Frontier Transport i.e., Frontier Transport and Lighthouse Capital go up and down completely randomly.

Pair Corralation between Frontier Transport and Lighthouse Capital

Assuming the 90 days trading horizon Frontier Transport Holdings is expected to under-perform the Lighthouse Capital. In addition to that, Frontier Transport is 1.28 times more volatile than Lighthouse Capital. It trades about -0.1 of its total potential returns per unit of risk. Lighthouse Capital is currently generating about -0.03 per unit of volatility. If you would invest  81,400  in Lighthouse Capital on December 25, 2024 and sell it today you would lose (2,400) from holding Lighthouse Capital or give up 2.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Frontier Transport Holdings  vs.  Lighthouse Capital

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.

Lighthouse Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lighthouse Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Lighthouse Capital 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 Lighthouse Capital

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

The idea behind Frontier Transport Holdings and Lighthouse Capital 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.