Correlation Between Marten Transport and Knight Transportation

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

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

Diversification Opportunities for Marten Transport and Knight Transportation

0.88

Correlation Coefficient

Marten Transport  Knight Transportation

Very poor diversification

The 3 months correlation between Marten and Knight is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Marten Transport and Knight Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Transportation and Marten Transport 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 Marten Transport are associated (or correlated) with Knight Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Transportation has no effect on the direction of Marten Transport i.e., Marten Transport and Knight Transportation go up and down completely randomly.

Pair Corralation between Marten Transport and Knight Transportation

Given the investment horizon of 90 days Marten Transport is expected to generate 0.91 times more return on investment than Knight Transportation. However, Marten Transport is 1.1 times less risky than Knight Transportation. It trades about -0.09 of its potential returns per unit of risk. Knight Transportation is currently generating about -0.14 per unit of risk. If you would invest  1,543  in Marten Transport on December 28, 2024 and sell it today you would lose (145.00) from holding Marten Transport or give up 9.4% of portfolio value over 90 days.

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

Marten Transport  vs.  Knight Transportation

Marten Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marten Transport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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.

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.

Pair Trading with Marten Transport and Knight Transportation

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

The idea behind Marten Transport and Knight Transportation 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.