Correlation Between TFI International and Covenant Logistics

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

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

Diversification Opportunities for TFI International and Covenant Logistics

0.66

Correlation Coefficient

TFI International  Covenant Logistics

Poor diversification

The 3 months correlation between TFI and Covenant is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Covenant Logistics Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics Group, and TFI International 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 TFI International are associated (or correlated) with Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics Group, has no effect on the direction of TFI International i.e., TFI International and Covenant Logistics go up and down completely randomly.

Pair Corralation between TFI International and Covenant Logistics

Given the investment horizon of 90 days TFI International is expected to generate 0.59 times more return on investment than Covenant Logistics. However, TFI International is 1.7 times less risky than Covenant Logistics. It trades about 0.04 of its potential returns per unit of risk. Covenant Logistics Group, is currently generating about 0.01 per unit of risk. If you would invest  10,308  in TFI International on October 7, 2024 and sell it today you would earn a total of  3,056  from holding TFI International or generate 29.65% return on investment over 90 days.

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

TFI International  vs.  Covenant Logistics Group,

TFI International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 1 (%) 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.

Covenant Logistics Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Covenant Logistics Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with TFI International and Covenant Logistics

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

The idea behind TFI International and Covenant Logistics Group, 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.