Correlation Between Italtile and Frontier Transport

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

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

Diversification Opportunities for Italtile and Frontier Transport

-0.49

Correlation Coefficient

Italtile  Frontier Transport

Very good diversification

The 3 months correlation between Italtile and Frontier is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Italtile and Frontier Transport Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Transport and Italtile 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 Italtile are associated (or correlated) with Frontier Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Transport has no effect on the direction of Italtile i.e., Italtile and Frontier Transport go up and down completely randomly.

Pair Corralation between Italtile and Frontier Transport

Assuming the 90 days trading horizon Italtile is expected to generate 0.44 times more return on investment than Frontier Transport. However, Italtile is 2.27 times less risky than Frontier Transport. It trades about 0.04 of its potential returns per unit of risk. Frontier Transport Holdings is currently generating about -0.02 per unit of risk. If you would invest  129,800  in Italtile on October 14, 2024 and sell it today you would earn a total of  4,100  from holding Italtile or generate 3.16% return on investment over 90 days.

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

Italtile  vs.  Frontier Transport Holdings

Italtile

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Italtile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Italtile is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Frontier Transport

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, Frontier Transport is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Italtile and Frontier Transport

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

The idea behind Italtile and Frontier Transport 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.