Correlation Between Frontier Group and BW Offshore

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

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

Diversification Opportunities for Frontier Group and BW Offshore

-0.26

Correlation Coefficient

Frontier Group  BW Offshore

Very good diversification

The 3 months correlation between Frontier and BWOFY is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Group Holdings and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited and Frontier Group 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 Frontier Group Holdings are associated (or correlated) with BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore Limited has no effect on the direction of Frontier Group i.e., Frontier Group and BW Offshore go up and down completely randomly.

Pair Corralation between Frontier Group and BW Offshore

Given the investment horizon of 90 days Frontier Group Holdings is expected to generate 3.56 times more return on investment than BW Offshore. However, Frontier Group is 3.56 times more volatile than BW Offshore Limited. It trades about 0.09 of its potential returns per unit of risk. BW Offshore Limited is currently generating about -0.12 per unit of risk. If you would invest  698.00  in Frontier Group Holdings on October 24, 2024 and sell it today you would earn a total of  154.00  from holding Frontier Group Holdings or generate 22.06% return on investment over 90 days.

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

Frontier Group Holdings  vs.  BW Offshore Limited

Frontier Group Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Group Holdings are ranked lower than 7 (%) 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.

BW Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Frontier Group and BW Offshore

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

The idea behind Frontier Group Holdings and BW Offshore Limited 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.