Correlation Between Covenant Logistics and Knight Transportation
Can any of the company-specific risk be diversified away by investing in both Covenant Logistics and Knight Transportation 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 Covenant Logistics and Knight Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Covenant Logistics Group, and Knight Transportation, you can compare the effects of market volatilities on Covenant Logistics and Knight Transportation 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 Covenant Logistics with a short position of Knight Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Covenant Logistics and Knight Transportation.
Diversification Opportunities for Covenant Logistics and Knight Transportation
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Covenant and Knight is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Covenant Logistics Group, and Knight Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Transportation and Covenant Logistics 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 Covenant Logistics Group, are associated (or correlated) with Knight Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Transportation has no effect on the direction of Covenant Logistics i.e., Covenant Logistics and Knight Transportation go up and down completely randomly.
Pair Corralation between Covenant Logistics and Knight Transportation
Given the investment horizon of 90 days Covenant Logistics Group, is expected to generate 1.21 times more return on investment than Knight Transportation. However, Covenant Logistics is 1.21 times more volatile than Knight Transportation. It trades about 0.24 of its potential returns per unit of risk. Knight Transportation is currently generating about 0.19 per unit of risk. If you would invest 5,187 in Covenant Logistics Group, on August 27, 2024 and sell it today you would earn a total of 749.00 from holding Covenant Logistics Group, or generate 14.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Covenant Logistics Group, vs. Knight Transportation
Performance |
| Timeline |
| Covenant Logistics Group, |
| Knight Transportation |
Covenant Logistics and Knight Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Covenant Logistics and Knight Transportation
The main advantage of trading using opposite Covenant Logistics and Knight Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Covenant Logistics position performs unexpectedly, Knight Transportation 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 Knight Transportation will offset losses from the drop in Knight Transportation's long position.| Covenant Logistics vs. Marten Transport | Covenant Logistics vs. Werner Enterprises | Covenant Logistics vs. Universal Logistics Holdings | Covenant Logistics vs. Schneider National |
| Knight Transportation vs. Marten Transport | Knight Transportation vs. Heartland Express | Knight Transportation vs. Universal Logistics Holdings | Knight Transportation vs. Schneider National |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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