Correlation Between Frontier Group and East West

Can any of the company-specific risk be diversified away by investing in both Frontier Group and East West 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 East West 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 East West Bancorp, you can compare the effects of market volatilities on Frontier Group and East West 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 East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Group and East West.

Diversification Opportunities for Frontier Group and East West

0.01

Correlation Coefficient

Frontier Group  East West

Significant diversification

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

Pair Corralation between Frontier Group and East West

Given the investment horizon of 90 days Frontier Group Holdings is expected to generate 3.35 times more return on investment than East West. However, Frontier Group is 3.35 times more volatile than East West Bancorp. It trades about 0.36 of its potential returns per unit of risk. East West Bancorp is currently generating about -0.23 per unit of risk. If you would invest  592.00  in Frontier Group Holdings on October 10, 2024 and sell it today you would earn a total of  240.00  from holding Frontier Group Holdings or generate 40.54% return on investment over 90 days.

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

Frontier Group Holdings  vs.  East West Bancorp

Frontier Group Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Group Holdings are ranked lower than 10 (%) 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.

East West Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, East West exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontier Group and East West

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

The idea behind Frontier Group Holdings and East West Bancorp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.