Correlation Between Landstar System and GXO Logistics

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

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

Diversification Opportunities for Landstar System and GXO Logistics

0.71

Correlation Coefficient

Landstar System  GXO Logistics

Poor diversification

The 3 months correlation between Landstar and GXO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Landstar System and GXO Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GXO Logistics and Landstar System 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 Landstar System are associated (or correlated) with GXO Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GXO Logistics has no effect on the direction of Landstar System i.e., Landstar System and GXO Logistics go up and down completely randomly.

Pair Corralation between Landstar System and GXO Logistics

Given the investment horizon of 90 days Landstar System is expected to under-perform the GXO Logistics. But the stock apears to be less risky and, when comparing its historical volatility, Landstar System is 1.93 times less risky than GXO Logistics. The stock trades about -0.14 of its potential returns per unit of risk. The GXO Logistics is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,314  in GXO Logistics on December 28, 2024 and sell it today you would lose (307.00) from holding GXO Logistics or give up 7.12% of portfolio value over 90 days.

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

Landstar System  vs.  GXO Logistics

Landstar System

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

GXO Logistics

Risk-Adjusted Performance

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 very healthy basic indicators, GXO Logistics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Landstar System and GXO Logistics

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

The idea behind Landstar System and GXO 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.