Correlation Between Frontier Transport and RMB Holdings

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

Diversification Opportunities for Frontier Transport and RMB Holdings

-0.05

Correlation Coefficient

Frontier Transport  RMB Holdings

Good diversification

The 3 months correlation between Frontier and RMB is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB 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 RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of Frontier Transport i.e., Frontier Transport and RMB Holdings go up and down completely randomly.

Pair Corralation between Frontier Transport and RMB Holdings

Assuming the 90 days trading horizon Frontier Transport Holdings is expected to generate 1.37 times more return on investment than RMB Holdings. However, Frontier Transport is 1.37 times more volatile than RMB Holdings. It trades about 0.07 of its potential returns per unit of risk. RMB Holdings is currently generating about 0.01 per unit of risk. If you would invest  33,502  in Frontier Transport Holdings on October 8, 2024 and sell it today you would earn a total of  43,398  from holding Frontier Transport Holdings or generate 129.54% return on investment over 90 days.

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

Frontier Transport Holdings  vs.  RMB Holdings

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.

RMB Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RMB Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, RMB Holdings 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 RMB Holdings

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

The idea behind Frontier Transport Holdings and RMB 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.