Correlation Between Marten Transport and Universal Logistics

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

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

Diversification Opportunities for Marten Transport and Universal Logistics

0.44

Correlation Coefficient

Marten Transport  Universal Logistics

Very weak diversification

The 3 months correlation between Marten and Universal is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Marten Transport and Universal Logistics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Logistics 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 Universal Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Logistics has no effect on the direction of Marten Transport i.e., Marten Transport and Universal Logistics go up and down completely randomly.

Pair Corralation between Marten Transport and Universal Logistics

Given the investment horizon of 90 days Marten Transport is expected to generate 14.17 times less return on investment than Universal Logistics. But when comparing it to its historical volatility, Marten Transport is 1.68 times less risky than Universal Logistics. It trades about 0.01 of its potential returns per unit of risk. Universal Logistics Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,178  in Universal Logistics Holdings on August 31, 2024 and sell it today you would earn a total of  945.00  from holding Universal Logistics Holdings or generate 22.62% return on investment over 90 days.

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

Marten Transport  vs.  Universal Logistics Holdings

Marten Transport

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marten Transport are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Marten Transport is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Universal Logistics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Logistics Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent essential indicators, Universal Logistics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marten Transport and Universal Logistics

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

The idea behind Marten Transport and Universal Logistics Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.