Correlation Between Frontier Group and International Consolidated

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

Diversification Opportunities for Frontier Group and International Consolidated

0.45

Correlation Coefficient

Frontier Group  International Consolidated

Very weak diversification

The 3 months correlation between Frontier and International is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Group Holdings and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Frontier Group i.e., Frontier Group and International Consolidated go up and down completely randomly.

Pair Corralation between Frontier Group and International Consolidated

Given the investment horizon of 90 days Frontier Group Holdings is expected to under-perform the International Consolidated. But the stock apears to be less risky and, when comparing its historical volatility, Frontier Group Holdings is 1.23 times less risky than International Consolidated. The stock trades about -0.05 of its potential returns per unit of risk. The International Consolidated Airlines is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  264.00  in International Consolidated Airlines on August 31, 2024 and sell it today you would earn a total of  57.00  from holding International Consolidated Airlines or generate 21.59% return on investment over 90 days.

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

Frontier Group Holdings  vs.  International Consolidated Air

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.

International Consolidated

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, International Consolidated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontier Group and International Consolidated

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

The idea behind Frontier Group Holdings and International Consolidated Airlines 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.