Correlation Between Frontier Transport and Wesizwe

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

Diversification Opportunities for Frontier Transport and Wesizwe

-0.53

Correlation Coefficient

Frontier Transport  Wesizwe

Excellent diversification

The 3 months correlation between Frontier and Wesizwe is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Transport Holdings and Wesizwe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesizwe 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 Wesizwe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesizwe has no effect on the direction of Frontier Transport i.e., Frontier Transport and Wesizwe go up and down completely randomly.

Pair Corralation between Frontier Transport and Wesizwe

Assuming the 90 days trading horizon Frontier Transport Holdings is expected to under-perform the Wesizwe. But the stock apears to be less risky and, when comparing its historical volatility, Frontier Transport Holdings is 3.99 times less risky than Wesizwe. The stock trades about -0.08 of its potential returns per unit of risk. The Wesizwe is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,200  in Wesizwe on December 24, 2024 and sell it today you would earn a total of  500.00  from holding Wesizwe or generate 11.9% return on investment over 90 days.

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

Frontier Transport Holdings  vs.  Wesizwe

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.

Wesizwe

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wesizwe are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Wesizwe exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontier Transport and Wesizwe

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

The idea behind Frontier Transport Holdings and Wesizwe 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.