Correlation Between Frontier Group and Union Pacific

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

Diversification Opportunities for Frontier Group and Union Pacific

-0.65

Correlation Coefficient

Frontier Group  Union Pacific

Excellent diversification

The 3 months correlation between Frontier and Union is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Group Holdings and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific 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 Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of Frontier Group i.e., Frontier Group and Union Pacific go up and down completely randomly.

Pair Corralation between Frontier Group and Union Pacific

Given the investment horizon of 90 days Frontier Group Holdings is expected to generate 3.75 times more return on investment than Union Pacific. However, Frontier Group is 3.75 times more volatile than Union Pacific. It trades about 0.05 of its potential returns per unit of risk. Union Pacific is currently generating about 0.05 per unit of risk. If you would invest  541.00  in Frontier Group Holdings on September 14, 2024 and sell it today you would earn a total of  94.50  from holding Frontier Group Holdings or generate 17.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Frontier Group Holdings  vs.  Union Pacific

Frontier Group Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Group Holdings are ranked lower than 12 (%) 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.

Union Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Frontier Group and Union Pacific

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

The idea behind Frontier Group Holdings and Union Pacific 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.