Correlation Between Guangdong Investment and Frontier Group

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

By analyzing existing cross correlation between Guangdong Investment Limited and Frontier Group Holdings, you can compare the effects of market volatilities on Guangdong Investment and Frontier Group 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 Guangdong Investment with a short position of Frontier Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Frontier Group.

Diversification Opportunities for Guangdong Investment and Frontier Group

0.39

Correlation Coefficient

Guangdong Investment  Frontier Group

Weak diversification

The 3 months correlation between Guangdong and Frontier is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Frontier Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Group Holdings and Guangdong Investment 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 Guangdong Investment Limited are associated (or correlated) with Frontier Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Group Holdings has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Frontier Group go up and down completely randomly.

Pair Corralation between Guangdong Investment and Frontier Group

Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 0.4 times more return on investment than Frontier Group. However, Guangdong Investment Limited is 2.52 times less risky than Frontier Group. It trades about 0.0 of its potential returns per unit of risk. Frontier Group Holdings is currently generating about -0.07 per unit of risk. If you would invest  79.00  in Guangdong Investment Limited on December 22, 2024 and sell it today you would lose (1.00) from holding Guangdong Investment Limited or give up 1.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Guangdong Investment Limited  vs.  Frontier Group Holdings

Guangdong Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Guangdong Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Frontier Group Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Guangdong Investment and Frontier Group

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

The idea behind Guangdong Investment Limited and Frontier Group 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.