Correlation Between United Parcel and Knight Transportation
Can any of the company-specific risk be diversified away by investing in both United Parcel 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 United Parcel and Knight Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Parcel Service and Knight Transportation, you can compare the effects of market volatilities on United Parcel 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 United Parcel with a short position of Knight Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and Knight Transportation.
Diversification Opportunities for United Parcel and Knight Transportation
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Knight is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Knight Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Transportation and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and Knight Transportation go up and down completely randomly.
Pair Corralation between United Parcel and Knight Transportation
Considering the 90-day investment horizon United Parcel Service is expected to under-perform the Knight Transportation. But the stock apears to be less risky and, when comparing its historical volatility, United Parcel Service is 1.19 times less risky than Knight Transportation. The stock trades about -0.01 of its potential returns per unit of risk. The Knight Transportation is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,617 in Knight Transportation on December 29, 2023 and sell it today you would earn a total of 789.00 from holding Knight Transportation or generate 17.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.8% |
Values | Daily Returns |
United Parcel Service vs. Knight Transportation
Performance |
Timeline |
United Parcel Service |
Knight Transportation |
United Parcel and Knight Transportation Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Parcel and Knight Transportation
The main advantage of trading using opposite United Parcel and Knight Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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.United Parcel vs. Expeditors International | United Parcel vs. Jayud Global Logistics | United Parcel vs. Freightos Limited Warrants | United Parcel vs. JB Hunt Transport |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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