Correlation Between Old Dominion and Knight Transportation
Can any of the company-specific risk be diversified away by investing in both Old Dominion 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 Old Dominion and Knight Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Dominion Freight and Knight Transportation, you can compare the effects of market volatilities on Old Dominion 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 Old Dominion with a short position of Knight Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and Knight Transportation.
Diversification Opportunities for Old Dominion and Knight Transportation
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Old and Knight is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Knight Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Transportation and Old Dominion 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 Old Dominion Freight 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 Old Dominion i.e., Old Dominion and Knight Transportation go up and down completely randomly.
Pair Corralation between Old Dominion and Knight Transportation
Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Knight Transportation. In addition to that, Old Dominion is 1.1 times more volatile than Knight Transportation. It trades about -0.04 of its total potential returns per unit of risk. Knight Transportation is currently generating about -0.04 per unit of volatility. If you would invest 4,976 in Knight Transportation on January 11, 2025 and sell it today you would lose (988.00) from holding Knight Transportation or give up 19.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Dominion Freight vs. Knight Transportation
Performance |
| Timeline |
| Old Dominion Freight |
| Knight Transportation |
Old Dominion and Knight Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Dominion and Knight Transportation
The main advantage of trading using opposite Old Dominion and Knight Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion 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.| Old Dominion vs. ArcBest Corp | Old Dominion vs. Marten Transport | Old Dominion vs. Werner Enterprises | Old Dominion vs. Saia Inc |
| 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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