Correlation Between Heartland Express and Marten Transport

Can any of the company-specific risk be diversified away by investing in both Heartland Express and Marten Transport 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 Heartland Express and Marten Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heartland Express and Marten Transport, you can compare the effects of market volatilities on Heartland Express and Marten Transport 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 Heartland Express with a short position of Marten Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Express and Marten Transport.

Diversification Opportunities for Heartland Express and Marten Transport

0.92

Correlation Coefficient

Heartland Express  Marten Transport

Almost no diversification

The 3 months correlation between Heartland and Marten is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Express and Marten Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marten Transport and Heartland Express 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 Heartland Express are associated (or correlated) with Marten Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marten Transport has no effect on the direction of Heartland Express i.e., Heartland Express and Marten Transport go up and down completely randomly.

Pair Corralation between Heartland Express and Marten Transport

Given the investment horizon of 90 days Heartland Express is expected to under-perform the Marten Transport. In addition to that, Heartland Express is 1.0 times more volatile than Marten Transport. It trades about -0.25 of its total potential returns per unit of risk. Marten Transport is currently generating about -0.21 per unit of volatility. If you would invest  2,022  in Marten Transport on January 24, 2024 and sell it today you would lose (398.00) from holding Marten Transport or give up 19.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Heartland Express  vs.  Marten Transport

Heartland Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heartland Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Marten Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marten Transport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Heartland Express and Marten Transport

The main advantage of trading using opposite Heartland Express and Marten Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heartland Express position performs unexpectedly, Marten Transport 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 Marten Transport will offset losses from the drop in Marten Transport's long position.

The idea behind Heartland Express and Marten Transport pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.