Correlation Between Knight Transportation and XPO Logistics
Can any of the company-specific risk be diversified away by investing in both Knight Transportation and XPO Logistics 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 XPO Logistics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knight Transportation and XPO Logistics, you can compare the effects of market volatilities on Knight Transportation and XPO Logistics 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 XPO Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knight Transportation and XPO Logistics.
Diversification Opportunities for Knight Transportation and XPO Logistics
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Knight and XPO is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and XPO Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XPO Logistics 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 XPO Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XPO Logistics has no effect on the direction of Knight Transportation i.e., Knight Transportation and XPO Logistics go up and down completely randomly.
Pair Corralation between Knight Transportation and XPO Logistics
Considering the 90-day investment horizon Knight Transportation is expected to generate 1.07 times more return on investment than XPO Logistics. However, Knight Transportation is 1.07 times more volatile than XPO Logistics. It trades about 0.2 of its potential returns per unit of risk. XPO Logistics is currently generating about 0.03 per unit of risk. If you would invest 5,273 in Knight Transportation on November 3, 2024 and sell it today you would earn a total of 436.00 from holding Knight Transportation or generate 8.27% 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. XPO Logistics
Performance |
| Timeline |
| Knight Transportation |
| XPO Logistics |
Knight Transportation and XPO Logistics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knight Transportation and XPO Logistics
The main advantage of trading using opposite Knight Transportation and XPO Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knight Transportation position performs unexpectedly, XPO Logistics 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 XPO Logistics will offset losses from the drop in XPO Logistics' long position.| Knight Transportation vs. Marten Transport | Knight Transportation vs. Heartland Express | Knight Transportation vs. Universal Logistics Holdings | Knight Transportation vs. Schneider National |
| XPO Logistics vs. Knight Transportation | XPO Logistics vs. Schneider National | XPO Logistics vs. Heartland Express | XPO Logistics vs. Saia Inc |
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 Stocks Directory module to find actively traded stocks across global markets.
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