Correlation Between Wabash National and Frontier

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

By analyzing existing cross correlation between Wabash National and Frontier Florida 686, you can compare the effects of market volatilities on Wabash National and Frontier 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 Wabash National with a short position of Frontier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wabash National and Frontier.

Diversification Opportunities for Wabash National and Frontier

-0.43

Correlation Coefficient

Wabash National  Frontier

Very good diversification

The 3 months correlation between Wabash and Frontier is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and Frontier Florida 686 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Florida 686 and Wabash National 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 Wabash National are associated (or correlated) with Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Florida 686 has no effect on the direction of Wabash National i.e., Wabash National and Frontier go up and down completely randomly.

Pair Corralation between Wabash National and Frontier

Considering the 90-day investment horizon Wabash National is expected to generate 0.86 times more return on investment than Frontier. However, Wabash National is 1.16 times less risky than Frontier. It trades about 0.04 of its potential returns per unit of risk. Frontier Florida 686 is currently generating about -0.03 per unit of risk. If you would invest  1,925  in Wabash National on September 13, 2024 and sell it today you would earn a total of  85.00  from holding Wabash National or generate 4.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	82.54%
Values	Daily Returns

Wabash National  vs.  Frontier Florida 686

Wabash National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Frontier Florida 686

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Florida 686 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Frontier is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wabash National and Frontier

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

The idea behind Wabash National and Frontier Florida 686 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.