Correlation Between Knight Transportation and RXO
Can any of the company-specific risk be diversified away by investing in both Knight Transportation and RXO 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 RXO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knight Transportation and RXO Inc, you can compare the effects of market volatilities on Knight Transportation and RXO 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 RXO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knight Transportation and RXO.
Diversification Opportunities for Knight Transportation and RXO
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Knight and RXO is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and RXO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RXO Inc 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 RXO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RXO Inc has no effect on the direction of Knight Transportation i.e., Knight Transportation and RXO go up and down completely randomly.
Pair Corralation between Knight Transportation and RXO
Considering the 90-day investment horizon Knight Transportation is expected to generate 4.26 times less return on investment than RXO. But when comparing it to its historical volatility, Knight Transportation is 1.46 times less risky than RXO. It trades about 0.01 of its potential returns per unit of risk. RXO Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,045 in RXO Inc on November 9, 2024 and sell it today you would earn a total of 102.00 from holding RXO Inc or generate 4.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knight Transportation vs. RXO Inc
Performance |
| Timeline |
| Knight Transportation |
| RXO Inc |
Knight Transportation and RXO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knight Transportation and RXO
The main advantage of trading using opposite Knight Transportation and RXO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knight Transportation position performs unexpectedly, RXO 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 RXO will offset losses from the drop in RXO's long position.| 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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