Correlation Between Frontier Communications and ICOA

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

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

Diversification Opportunities for Frontier Communications and ICOA

0.31

Correlation Coefficient

Frontier Communications  ICOA

Weak diversification

The 3 months correlation between Frontier and ICOA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Communications Parent and ICOA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICOA Inc and Frontier Communications 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 Communications Parent are associated (or correlated) with ICOA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICOA Inc has no effect on the direction of Frontier Communications i.e., Frontier Communications and ICOA go up and down completely randomly.

Pair Corralation between Frontier Communications and ICOA

Given the investment horizon of 90 days Frontier Communications Parent is expected to under-perform the ICOA. But the stock apears to be less risky and, when comparing its historical volatility, Frontier Communications Parent is 16.64 times less risky than ICOA. The stock trades about -0.04 of its potential returns per unit of risk. The ICOA Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.03  in ICOA Inc on January 26, 2024 and sell it today you would lose (0.02) from holding ICOA Inc or give up 66.67% of portfolio value over 90 days.

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

Frontier Communications Parent  vs.  ICOA Inc

Frontier Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Communications Parent has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Frontier Communications is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

ICOA Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICOA Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, ICOA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontier Communications and ICOA

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

The idea behind Frontier Communications Parent and ICOA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.