Correlation Between Frontier Communications and Gogo

Can any of the company-specific risk be diversified away by investing in both Frontier Communications and Gogo 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 Communications and Gogo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Frontier Communications Parent and Gogo Inc, you can compare the effects of market volatilities on Frontier Communications and Gogo 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 Communications with a short position of Gogo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Communications and Gogo.

Diversification Opportunities for Frontier Communications and Gogo

0.31

Correlation Coefficient

Frontier Communications  Gogo

Weak diversification

The 3 months correlation between Frontier and Gogo is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Communications Parent and Gogo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gogo Inc and Frontier Communications 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 Communications Parent are associated (or correlated) with Gogo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gogo Inc has no effect on the direction of Frontier Communications i.e., Frontier Communications and Gogo go up and down completely randomly.

Pair Corralation between Frontier Communications and Gogo

Given the investment horizon of 90 days Frontier Communications Parent is expected to generate 0.08 times more return on investment than Gogo. However, Frontier Communications Parent is 12.75 times less risky than Gogo. It trades about 0.21 of its potential returns per unit of risk. Gogo Inc is currently generating about -0.03 per unit of risk. If you would invest  3,472  in Frontier Communications Parent on December 2, 2024 and sell it today you would earn a total of  127.00  from holding Frontier Communications Parent or generate 3.66% return on investment over 90 days.

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

Frontier Communications Parent  vs.  Gogo Inc

Frontier Communications

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Communications Parent are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Frontier Communications is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Gogo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gogo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Frontier Communications and Gogo

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

The idea behind Frontier Communications Parent and Gogo Inc 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.