Correlation Between Frontier Group and BEST

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

Diversification Opportunities for Frontier Group and BEST

-0.39

Correlation Coefficient

Frontier Group  BEST

Very good diversification

The 3 months correlation between Frontier and BEST is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Group Holdings and BEST Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEST Inc 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 BEST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEST Inc has no effect on the direction of Frontier Group i.e., Frontier Group and BEST go up and down completely randomly.

Pair Corralation between Frontier Group and BEST

Given the investment horizon of 90 days Frontier Group Holdings is expected to under-perform the BEST. In addition to that, Frontier Group is 1.1 times more volatile than BEST Inc. It trades about -0.02 of its total potential returns per unit of risk. BEST Inc is currently generating about 0.01 per unit of volatility. If you would invest  245.00  in BEST Inc on January 31, 2024 and sell it today you would lose (35.00) from holding BEST Inc or give up 14.29% of portfolio value over 90 days.

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

Frontier Group Holdings  vs.  BEST Inc

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.

BEST Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BEST Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Frontier Group and BEST

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

The idea behind Frontier Group Holdings and BEST Inc 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.