Correlation Between Covenant Logistics and FARM 51

Can any of the company-specific risk be diversified away by investing in both Covenant Logistics and FARM 51 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 Covenant Logistics and FARM 51 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Covenant Logistics Group and FARM 51 GROUP, you can compare the effects of market volatilities on Covenant Logistics and FARM 51 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 Covenant Logistics with a short position of FARM 51. Check out your portfolio center. Please also check ongoing floating volatility patterns of Covenant Logistics and FARM 51.

Diversification Opportunities for Covenant Logistics and FARM 51

0.43

Correlation Coefficient

Covenant Logistics  FARM 51

Very weak diversification

The 3 months correlation between Covenant and FARM is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Covenant Logistics Group and FARM 51 GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM 51 GROUP and Covenant 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 Covenant Logistics Group are associated (or correlated) with FARM 51. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM 51 GROUP has no effect on the direction of Covenant Logistics i.e., Covenant Logistics and FARM 51 go up and down completely randomly.

Pair Corralation between Covenant Logistics and FARM 51

Assuming the 90 days horizon Covenant Logistics Group is expected to generate 0.63 times more return on investment than FARM 51. However, Covenant Logistics Group is 1.6 times less risky than FARM 51. It trades about -0.04 of its potential returns per unit of risk. FARM 51 GROUP is currently generating about -0.09 per unit of risk. If you would invest  2,325  in Covenant Logistics Group on December 20, 2024 and sell it today you would lose (285.00) from holding Covenant Logistics Group or give up 12.26% of portfolio value over 90 days.

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

Covenant Logistics Group  vs.  FARM 51 GROUP

Covenant Logistics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Covenant Logistics Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

FARM 51 GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days FARM 51 GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Covenant Logistics and FARM 51

The main advantage of trading using opposite Covenant Logistics and FARM 51 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Covenant Logistics position performs unexpectedly, FARM 51 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 FARM 51 will offset losses from the drop in FARM 51's long position.

The idea behind Covenant Logistics Group and FARM 51 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.