Correlation Between Heartland Express and XPO Logistics

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

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

Diversification Opportunities for Heartland Express and XPO Logistics

0.93

Correlation Coefficient

Heartland Express  XPO Logistics

Almost no diversification

The 3 months correlation between Heartland and XPO is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Express and XPO Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XPO Logistics 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 XPO Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XPO Logistics has no effect on the direction of Heartland Express i.e., Heartland Express and XPO Logistics go up and down completely randomly.

Pair Corralation between Heartland Express and XPO Logistics

Given the investment horizon of 90 days Heartland Express is expected to under-perform the XPO Logistics. But the stock apears to be less risky and, when comparing its historical volatility, Heartland Express is 1.3 times less risky than XPO Logistics. The stock trades about -0.13 of its potential returns per unit of risk. The XPO Logistics is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  13,226  in XPO Logistics on December 27, 2024 and sell it today you would lose (1,905) from holding XPO Logistics or give up 14.4% of portfolio value over 90 days.

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

Heartland Express  vs.  XPO Logistics

Heartland Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heartland Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

XPO Logistics

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Heartland Express and XPO Logistics

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

The idea behind Heartland Express and XPO Logistics 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.