Correlation Between RXO and TFI International

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

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

Diversification Opportunities for RXO and TFI International

0.12

Correlation Coefficient

RXO  TFI International

Average diversification

The 3 months correlation between RXO and TFI is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding RXO Inc and TFI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFI International 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 TFI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFI International has no effect on the direction of RXO i.e., RXO and TFI International go up and down completely randomly.

Pair Corralation between RXO and TFI International

Considering the 90-day investment horizon RXO Inc is expected to generate 1.38 times more return on investment than TFI International. However, RXO is 1.38 times more volatile than TFI International. It trades about 0.06 of its potential returns per unit of risk. TFI International is currently generating about 0.05 per unit of risk. If you would invest  1,671  in RXO Inc on September 3, 2024 and sell it today you would earn a total of  1,332  from holding RXO Inc or generate 79.71% return on investment over 90 days.

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

RXO Inc  vs.  TFI International

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.

TFI International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with RXO and TFI International

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

The idea behind RXO Inc and TFI International 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.