Correlation Between Workforce Holdings and Frontier Transport

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

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

Diversification Opportunities for Workforce Holdings and Frontier Transport

0.15

Correlation Coefficient

Workforce Holdings  Frontier Transport

Average diversification

The 3 months correlation between Workforce and Frontier is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Workforce Holdings and Frontier Transport Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Transport and Workforce Holdings 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 Workforce Holdings 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 Workforce Holdings i.e., Workforce Holdings and Frontier Transport go up and down completely randomly.

Pair Corralation between Workforce Holdings and Frontier Transport

Assuming the 90 days trading horizon Workforce Holdings is expected to generate 1.88 times less return on investment than Frontier Transport. But when comparing it to its historical volatility, Workforce Holdings is 1.23 times less risky than Frontier Transport. It trades about 0.03 of its potential returns per unit of risk. Frontier Transport Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  66,389  in Frontier Transport Holdings on October 13, 2024 and sell it today you would earn a total of  7,511  from holding Frontier Transport Holdings or generate 11.31% return on investment over 90 days.

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

Workforce Holdings  vs.  Frontier Transport Holdings

Workforce Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Workforce Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm 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 Workforce Holdings and Frontier Transport

The main advantage of trading using opposite Workforce Holdings and Frontier Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workforce Holdings 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 Workforce Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.