Correlation Between Frontier Group and Air T

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

Diversification Opportunities for Frontier Group and Air T

-0.38

Correlation Coefficient

Frontier Group  Air T

Very good diversification

The 3 months correlation between Frontier and Air is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Group Holdings and Air T Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air T 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 Air T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air T Inc has no effect on the direction of Frontier Group i.e., Frontier Group and Air T go up and down completely randomly.

Pair Corralation between Frontier Group and Air T

Given the investment horizon of 90 days Frontier Group Holdings is expected to under-perform the Air T. But the stock apears to be less risky and, when comparing its historical volatility, Frontier Group Holdings is 1.58 times less risky than Air T. The stock trades about -0.23 of its potential returns per unit of risk. The Air T Inc is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,390  in Air T Inc on April 2, 2024 and sell it today you would lose (190.00) from holding Air T Inc or give up 7.95% 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.  Air T Inc

Frontier Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in August 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Air T Inc

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air T Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Air T may actually be approaching a critical reversion point that can send shares even higher in August 2024.

Pair Trading with Frontier Group and Air T

The main advantage of trading using opposite Frontier Group and Air T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Group position performs unexpectedly, Air T 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 Air T will offset losses from the drop in Air T's long position.

The idea behind Frontier Group Holdings and Air T 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.