Correlation Between Knight Transportation and RXO

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

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

Diversification Opportunities for Knight Transportation and RXO

0.83

Correlation Coefficient

Knight Transportation  RXO

Very poor diversification

The 3 months correlation between Knight and RXO is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and RXO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RXO Inc and Knight Transportation 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 Knight Transportation 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 Knight Transportation i.e., Knight Transportation and RXO go up and down completely randomly.

Pair Corralation between Knight Transportation and RXO

Considering the 90-day investment horizon Knight Transportation is expected to generate 0.55 times more return on investment than RXO. However, Knight Transportation is 1.82 times less risky than RXO. It trades about -0.16 of its potential returns per unit of risk. RXO Inc is currently generating about -0.1 per unit of risk. If you would invest  5,355  in Knight Transportation on December 26, 2024 and sell it today you would lose (898.00) from holding Knight Transportation or give up 16.77% of portfolio value over 90 days.

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

Knight Transportation  vs.  RXO Inc

Knight Transportation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knight Transportation 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

RXO Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days RXO Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting 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 Knight Transportation and RXO

The main advantage of trading using opposite Knight Transportation and RXO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knight Transportation 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 Knight Transportation 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..