Correlation Between Frontdoor and Boyd Group

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

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

Diversification Opportunities for Frontdoor and Boyd Group

-0.71

Correlation Coefficient

Frontdoor  Boyd Group

Pay attention - limited upside

The 3 months correlation between Frontdoor and Boyd is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Frontdoor and Boyd Group Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Group Services and Frontdoor 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 Frontdoor are associated (or correlated) with Boyd Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Group Services has no effect on the direction of Frontdoor i.e., Frontdoor and Boyd Group go up and down completely randomly.

Pair Corralation between Frontdoor and Boyd Group

Given the investment horizon of 90 days Frontdoor is expected to generate 1.32 times less return on investment than Boyd Group. But when comparing it to its historical volatility, Frontdoor is 1.09 times less risky than Boyd Group. It trades about 0.05 of its potential returns per unit of risk. Boyd Group Services is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,444  in Boyd Group Services on March 17, 2024 and sell it today you would earn a total of  8,639  from holding Boyd Group Services or generate 82.72% return on investment over 90 days.

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

Frontdoor  vs.  Boyd Group Services

Frontdoor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontdoor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental indicators, Frontdoor reported solid returns over the last few months and may actually be approaching a breakup point.

Boyd Group Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boyd Group Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Frontdoor and Boyd Group

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

The idea behind Frontdoor and Boyd Group Services 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.