Correlation Between International Consolidated and Frontier Group

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

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

Diversification Opportunities for International Consolidated and Frontier Group

0.58

Correlation Coefficient

International Consolidated  Frontier Group

Very weak diversification

The 3 months correlation between International and Frontier is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air 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 International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and Frontier Group go up and down completely randomly.

Pair Corralation between International Consolidated and Frontier Group

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 0.44 times more return on investment than Frontier Group. However, International Consolidated Airlines is 2.28 times less risky than Frontier Group. It trades about 0.08 of its potential returns per unit of risk. Frontier Group Holdings is currently generating about 0.0 per unit of risk. If you would invest  382.00  in International Consolidated Airlines on August 31, 2024 and sell it today you would earn a total of  266.00  from holding International Consolidated Airlines or generate 69.63% return on investment over 90 days.

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

International Consolidated Air  vs.  Frontier Group Holdings

International Consolidated

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, International Consolidated showed solid returns over the last few months and may actually be approaching a breakup point.

Frontier Group Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Group Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Frontier Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Consolidated and Frontier Group

The main advantage of trading using opposite International Consolidated and Frontier Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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 International Consolidated Airlines 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.