Correlation Between GXO Logistics and Landstar System

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

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

Diversification Opportunities for GXO Logistics and Landstar System

0.42

Correlation Coefficient

GXO Logistics  Landstar System

Very weak diversification

The 3 months correlation between GXO and Landstar is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding GXO Logistics and Landstar System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landstar System and GXO 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 GXO Logistics are associated (or correlated) with Landstar System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landstar System has no effect on the direction of GXO Logistics i.e., GXO Logistics and Landstar System go up and down completely randomly.

Pair Corralation between GXO Logistics and Landstar System

Considering the 90-day investment horizon GXO Logistics is expected to under-perform the Landstar System. In addition to that, GXO Logistics is 2.42 times more volatile than Landstar System. It trades about -0.51 of its total potential returns per unit of risk. Landstar System is currently generating about -0.23 per unit of volatility. If you would invest  18,592  in Landstar System on September 29, 2024 and sell it today you would lose (1,160) from holding Landstar System or give up 6.24% of portfolio value over 90 days.

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

GXO Logistics  vs.  Landstar System

GXO Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GXO Logistics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Landstar System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Landstar System has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with GXO Logistics and Landstar System

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

The idea behind GXO Logistics and Landstar System 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.