Correlation Between Heartland Express and Werner Enterprises

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

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

Diversification Opportunities for Heartland Express and Werner Enterprises

0.85

Correlation Coefficient

Heartland Express  Werner Enterprises

Very poor diversification

The 3 months correlation between Heartland and Werner is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Express and Werner Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Werner Enterprises 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 Werner Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Werner Enterprises has no effect on the direction of Heartland Express i.e., Heartland Express and Werner Enterprises go up and down completely randomly.

Pair Corralation between Heartland Express and Werner Enterprises

Assuming the 90 days horizon Heartland Express is expected to under-perform the Werner Enterprises. In addition to that, Heartland Express is 1.08 times more volatile than Werner Enterprises. It trades about -0.03 of its total potential returns per unit of risk. Werner Enterprises is currently generating about -0.01 per unit of volatility. If you would invest  3,934  in Werner Enterprises on September 28, 2024 and sell it today you would lose (514.00) from holding Werner Enterprises or give up 13.07% of portfolio value over 90 days.

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

Heartland Express  vs.  Werner Enterprises

Heartland Express

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Heartland Express has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Heartland Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Werner Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Werner Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Werner Enterprises is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Heartland Express and Werner Enterprises

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

The idea behind Heartland Express and Werner Enterprises 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.