Correlation Between Knight Transportation and United Airlines
Can any of the company-specific risk be diversified away by investing in both Knight Transportation and United 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 United 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 United Airlines Holdings, you can compare the effects of market volatilities on Knight Transportation and United 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knight Transportation and United Airlines.
Diversification Opportunities for Knight Transportation and United Airlines
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Knight and United is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Knight Transportation i.e., Knight Transportation and United Airlines go up and down completely randomly.
Pair Corralation between Knight Transportation and United Airlines
Considering the 90-day investment horizon Knight Transportation is expected to generate 6.45 times less return on investment than United Airlines. But when comparing it to its historical volatility, Knight Transportation is 1.39 times less risky than United Airlines. It trades about 0.02 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,503 in United Airlines Holdings on August 26, 2024 and sell it today you would earn a total of 5,021 from holding United Airlines Holdings or generate 111.5% 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. United Airlines Holdings
Performance |
| Timeline |
| Knight Transportation |
| United Airlines Holdings |
Knight Transportation and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knight Transportation and United Airlines
The main advantage of trading using opposite Knight Transportation and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knight Transportation position performs unexpectedly, United 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 United Airlines will offset losses from the drop in United Airlines' long position.| Knight Transportation vs. Marten Transport | Knight Transportation vs. Heartland Express | Knight Transportation vs. Universal Logistics Holdings | Knight Transportation vs. Schneider National |
| United Airlines vs. American Airlines Group | United Airlines vs. Southwest Airlines | United Airlines vs. JetBlue Airways Corp | United 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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