Correlation Between Volaris and Frontier Group

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

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

Diversification Opportunities for Volaris and Frontier Group

0.74

Correlation Coefficient

Volaris  Frontier Group

Poor diversification

The 3 months correlation between Volaris and Frontier is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Volaris and Frontier Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Group Holdings and Volaris 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 Volaris are associated (or correlated) with Frontier Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Group Holdings has no effect on the direction of Volaris i.e., Volaris and Frontier Group go up and down completely randomly.

Pair Corralation between Volaris and Frontier Group

Given the investment horizon of 90 days Volaris is expected to under-perform the Frontier Group. But the stock apears to be less risky and, when comparing its historical volatility, Volaris is 1.45 times less risky than Frontier Group. The stock trades about -0.04 of its potential returns per unit of risk. The Frontier Group Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  434.00  in Frontier Group Holdings on March 29, 2025 and sell it today you would lose (73.00) from holding Frontier Group Holdings or give up 16.82% of portfolio value over 90 days.

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

Volaris  vs.  Frontier Group Holdings

Volaris

Risk-Adjusted Performance

Very Weak

Over the last 90 days Volaris 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.

Frontier Group Holdings

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Volaris and Frontier Group

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

The idea behind Volaris and Frontier Group Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.