Correlation Between Gogo and Frontier Communications

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

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

Diversification Opportunities for Gogo and Frontier Communications

-0.01

Correlation Coefficient

Gogo  Frontier Communications

Good diversification

The 3 months correlation between Gogo and Frontier is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Gogo Inc and Frontier Communications Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Communications and Gogo 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 Gogo Inc are associated (or correlated) with Frontier Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Communications has no effect on the direction of Gogo i.e., Gogo and Frontier Communications go up and down completely randomly.

Pair Corralation between Gogo and Frontier Communications

Given the investment horizon of 90 days Gogo Inc is expected to generate 16.66 times more return on investment than Frontier Communications. However, Gogo is 16.66 times more volatile than Frontier Communications Parent. It trades about 0.07 of its potential returns per unit of risk. Frontier Communications Parent is currently generating about 0.21 per unit of risk. If you would invest  759.00  in Gogo Inc on December 28, 2024 and sell it today you would earn a total of  102.00  from holding Gogo Inc or generate 13.44% return on investment over 90 days.

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

Gogo Inc  vs.  Frontier Communications Parent

Gogo Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gogo Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Gogo displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Gogo and Frontier Communications

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

The idea behind Gogo Inc and Frontier Communications Parent 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.