Correlation Between Knight Transportation and American Airlines
Can any of the company-specific risk be diversified away by investing in both Knight Transportation and American Airlines 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 Knight Transportation and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knight Transportation and American Airlines Group, you can compare the effects of market volatilities on Knight Transportation and American Airlines 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 Knight Transportation with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knight Transportation and American Airlines.
Diversification Opportunities for Knight Transportation and American Airlines
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Knight and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Knight Transportation 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 Knight Transportation are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Knight Transportation i.e., Knight Transportation and American Airlines go up and down completely randomly.
Pair Corralation between Knight Transportation and American Airlines
Considering the 90-day investment horizon Knight Transportation is expected to generate 0.94 times more return on investment than American Airlines. However, Knight Transportation is 1.07 times less risky than American Airlines. It trades about 0.21 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.12 per unit of risk. If you would invest 5,380 in Knight Transportation on August 29, 2024 and sell it today you would earn a total of 579.00 from holding Knight Transportation or generate 10.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knight Transportation vs. American Airlines Group
Performance |
| Timeline |
| Knight Transportation |
| American Airlines |
Knight Transportation and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knight Transportation and American Airlines
The main advantage of trading using opposite Knight Transportation and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knight Transportation position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Knight Transportation vs. Marten Transport | Knight Transportation vs. Heartland Express | Knight Transportation vs. Universal Logistics Holdings | Knight Transportation vs. Schneider National |
| American Airlines vs. JetBlue Airways Corp | American Airlines vs. SkyWest | American Airlines vs. International Consolidated Airlines | American Airlines vs. Spirit Airlines |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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