Correlation Between SPAR and Frontier Transport

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

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

Diversification Opportunities for SPAR and Frontier Transport

0.0

Correlation Coefficient

SPAR  Frontier Transport

Pay attention - limited upside

The 3 months correlation between SPAR and Frontier is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SPAR Group and Frontier Transport Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Transport and SPAR 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 SPAR Group 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 SPAR i.e., SPAR and Frontier Transport go up and down completely randomly.

Pair Corralation between SPAR and Frontier Transport

Assuming the 90 days trading horizon SPAR Group is expected to under-perform the Frontier Transport. But the stock apears to be less risky and, when comparing its historical volatility, SPAR Group is 2.32 times less risky than Frontier Transport. The stock trades about -0.12 of its potential returns per unit of risk. The Frontier Transport Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  74,410  in Frontier Transport Holdings on October 8, 2024 and sell it today you would earn a total of  2,490  from holding Frontier Transport Holdings or generate 3.35% return on investment over 90 days.

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

SPAR Group  vs.  Frontier Transport Holdings

SPAR Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPAR Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, SPAR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Frontier Transport

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Transport Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Frontier Transport may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SPAR and Frontier Transport

The main advantage of trading using opposite SPAR and Frontier Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPAR 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 SPAR Group 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.