Correlation Between Tradeweb Markets and Covenant Logistics

Can any of the company-specific risk be diversified away by investing in both Tradeweb Markets and Covenant 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 Tradeweb Markets and Covenant Logistics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tradeweb Markets and Covenant Logistics Group, you can compare the effects of market volatilities on Tradeweb Markets and Covenant 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 Tradeweb Markets with a short position of Covenant Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tradeweb Markets and Covenant Logistics.

Diversification Opportunities for Tradeweb Markets and Covenant Logistics

0.61

Correlation Coefficient

Tradeweb Markets  Covenant Logistics

Poor diversification

The 3 months correlation between Tradeweb and Covenant is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tradeweb Markets and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics and Tradeweb Markets 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 Tradeweb Markets are associated (or correlated) with Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics has no effect on the direction of Tradeweb Markets i.e., Tradeweb Markets and Covenant Logistics go up and down completely randomly.

Pair Corralation between Tradeweb Markets and Covenant Logistics

Assuming the 90 days horizon Tradeweb Markets is expected to generate 0.76 times more return on investment than Covenant Logistics. However, Tradeweb Markets is 1.31 times less risky than Covenant Logistics. It trades about 0.29 of its potential returns per unit of risk. Covenant Logistics Group is currently generating about 0.01 per unit of risk. If you would invest  12,000  in Tradeweb Markets on October 11, 2024 and sell it today you would earn a total of  1,100  from holding Tradeweb Markets or generate 9.17% return on investment over 90 days.

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

Tradeweb Markets  vs.  Covenant Logistics Group

Tradeweb Markets

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tradeweb Markets may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Covenant Logistics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Covenant Logistics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tradeweb Markets and Covenant Logistics

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

The idea behind Tradeweb Markets and Covenant Logistics Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.