Correlation Between Frontier Transport and Schroder European

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

Diversification Opportunities for Frontier Transport and Schroder European

-0.08

Correlation Coefficient

Frontier Transport  Schroder European

Good diversification

The 3 months correlation between Frontier and Schroder is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and Schroder European Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schroder European Real 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 Schroder European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schroder European Real has no effect on the direction of Frontier Transport i.e., Frontier Transport and Schroder European go up and down completely randomly.

Pair Corralation between Frontier Transport and Schroder European

Assuming the 90 days trading horizon Frontier Transport Holdings is expected to generate 0.55 times more return on investment than Schroder European. However, Frontier Transport Holdings is 1.83 times less risky than Schroder European. It trades about 0.15 of its potential returns per unit of risk. Schroder European Real is currently generating about -0.22 per unit of risk. If you would invest  70,448  in Frontier Transport Holdings on September 24, 2024 and sell it today you would earn a total of  6,452  from holding Frontier Transport Holdings or generate 9.16% 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.  Schroder European Real

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 January 2025.

Schroder European Real

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Frontier Transport and Schroder European

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

The idea behind Frontier Transport Holdings and Schroder European Real 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.