Correlation Between RXO and Knight Transportation

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

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

Diversification Opportunities for RXO and Knight Transportation

0.48

Correlation Coefficient

RXO  Knight Transportation

Very weak diversification

The 3 months correlation between RXO and Knight is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding RXO Inc and Knight Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Transportation and RXO 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 RXO Inc 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 RXO i.e., RXO and Knight Transportation go up and down completely randomly.

Pair Corralation between RXO and Knight Transportation

Considering the 90-day investment horizon RXO is expected to generate 1.25 times less return on investment than Knight Transportation. In addition to that, RXO is 1.98 times more volatile than Knight Transportation. It trades about 0.1 of its total potential returns per unit of risk. Knight Transportation is currently generating about 0.26 per unit of volatility. If you would invest  5,293  in Knight Transportation on September 2, 2024 and sell it today you would earn a total of  643.00  from holding Knight Transportation or generate 12.15% return on investment over 90 days.

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

RXO Inc  vs.  Knight Transportation

RXO Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RXO Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, RXO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Knight Transportation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knight Transportation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Knight Transportation showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RXO and Knight Transportation

The main advantage of trading using opposite RXO and Knight Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RXO 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 RXO Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.