Correlation Between Frontier Group and Heartland Express

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

Diversification Opportunities for Frontier Group and Heartland Express

-0.34

Correlation Coefficient

Frontier Group  Heartland Express

Very good diversification

The 3 months correlation between Frontier and Heartland is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Group Holdings and Heartland Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Express 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 Heartland Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Express has no effect on the direction of Frontier Group i.e., Frontier Group and Heartland Express go up and down completely randomly.

Pair Corralation between Frontier Group and Heartland Express

Given the investment horizon of 90 days Frontier Group Holdings is expected to generate 2.72 times more return on investment than Heartland Express. However, Frontier Group is 2.72 times more volatile than Heartland Express. It trades about 0.17 of its potential returns per unit of risk. Heartland Express is currently generating about 0.03 per unit of risk. If you would invest  356.00  in Frontier Group Holdings on August 31, 2024 and sell it today you would earn a total of  213.00  from holding Frontier Group Holdings or generate 59.83% 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.  Heartland Express

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.

Heartland Express

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Express are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Heartland Express is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Frontier Group and Heartland Express

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

The idea behind Frontier Group Holdings and Heartland Express 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.