Correlation Between ArcBest Corp and RXO

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

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

Diversification Opportunities for ArcBest Corp and RXO

0.4

Correlation Coefficient

ArcBest Corp  RXO

Very weak diversification

The 3 months correlation between ArcBest and RXO is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ArcBest Corp and RXO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RXO Inc and ArcBest Corp 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 ArcBest Corp are associated (or correlated) with RXO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RXO Inc has no effect on the direction of ArcBest Corp i.e., ArcBest Corp and RXO go up and down completely randomly.

Pair Corralation between ArcBest Corp and RXO

Given the investment horizon of 90 days ArcBest Corp is expected to generate 1.03 times more return on investment than RXO. However, ArcBest Corp is 1.03 times more volatile than RXO Inc. It trades about 0.06 of its potential returns per unit of risk. RXO Inc is currently generating about 0.04 per unit of risk. If you would invest  10,519  in ArcBest Corp on September 2, 2024 and sell it today you would earn a total of  1,009  from holding ArcBest Corp or generate 9.59% return on investment over 90 days.

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

ArcBest Corp  vs.  RXO Inc

ArcBest Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ArcBest Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, ArcBest Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RXO Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RXO Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, RXO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ArcBest Corp and RXO

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

The idea behind ArcBest Corp and RXO Inc 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.