Correlation Between Landstar System and ZTO Express

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

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

Diversification Opportunities for Landstar System and ZTO Express

-0.01

Correlation Coefficient

Landstar System  ZTO Express

Good diversification

The 3 months correlation between Landstar and ZTO is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Landstar System and ZTO Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTO Express 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 ZTO Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTO Express has no effect on the direction of Landstar System i.e., Landstar System and ZTO Express go up and down completely randomly.

Pair Corralation between Landstar System and ZTO Express

Given the investment horizon of 90 days Landstar System is expected to generate 0.68 times more return on investment than ZTO Express. However, Landstar System is 1.47 times less risky than ZTO Express. It trades about 0.02 of its potential returns per unit of risk. ZTO Express is currently generating about -0.02 per unit of risk. If you would invest  16,588  in Landstar System on September 4, 2024 and sell it today you would earn a total of  1,835  from holding Landstar System or generate 11.06% return on investment over 90 days.

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

Landstar System  vs.  ZTO Express

Landstar System

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Landstar System has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Landstar System is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

ZTO Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZTO Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Landstar System and ZTO Express

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

The idea behind Landstar System and ZTO Express 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.