Correlation Between XPO Logistics and Knight Transportation
Can any of the company-specific risk be diversified away by investing in both XPO Logistics 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 XPO Logistics and Knight Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XPO Logistics and Knight Transportation, you can compare the effects of market volatilities on XPO Logistics 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 XPO Logistics with a short position of Knight Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of XPO Logistics and Knight Transportation.
Diversification Opportunities for XPO Logistics and Knight Transportation
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between XPO and Knight is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding XPO Logistics and Knight Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Transportation and XPO Logistics 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 XPO Logistics 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 XPO Logistics i.e., XPO Logistics and Knight Transportation go up and down completely randomly.
Pair Corralation between XPO Logistics and Knight Transportation
Considering the 90-day investment horizon XPO Logistics is expected to generate 1.52 times more return on investment than Knight Transportation. However, XPO Logistics is 1.52 times more volatile than Knight Transportation. It trades about 0.33 of its potential returns per unit of risk. Knight Transportation is currently generating about 0.2 per unit of risk. If you would invest 11,770 in XPO Logistics on August 26, 2024 and sell it today you would earn a total of 3,127 from holding XPO Logistics or generate 26.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
XPO Logistics vs. Knight Transportation
Performance |
| Timeline |
| XPO Logistics |
| Knight Transportation |
XPO Logistics and Knight Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XPO Logistics and Knight Transportation
The main advantage of trading using opposite XPO Logistics and Knight Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XPO Logistics 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.| XPO Logistics vs. Knight Transportation | XPO Logistics vs. Schneider National | XPO Logistics vs. Heartland Express | XPO Logistics 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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