Correlation Between Werner Enterprises and Knight Transportation

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

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

Diversification Opportunities for Werner Enterprises and Knight Transportation

0.94

Correlation Coefficient

Werner Enterprises  Knight Transportation

Almost no diversification

The 3 months correlation between Werner and Knight is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Werner Enterprises and Knight Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Transportation and Werner Enterprises 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 Werner Enterprises 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 Werner Enterprises i.e., Werner Enterprises and Knight Transportation go up and down completely randomly.

Pair Corralation between Werner Enterprises and Knight Transportation

Given the investment horizon of 90 days Werner Enterprises is expected to under-perform the Knight Transportation. But the stock apears to be less risky and, when comparing its historical volatility, Werner Enterprises is 1.02 times less risky than Knight Transportation. The stock trades about -0.17 of its potential returns per unit of risk. The Knight Transportation is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  5,238  in Knight Transportation on December 28, 2024 and sell it today you would lose (781.00) from holding Knight Transportation or give up 14.91% of portfolio value over 90 days.

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

Werner Enterprises  vs.  Knight Transportation

Werner Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Werner Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing 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 Werner Enterprises and Knight Transportation

The main advantage of trading using opposite Werner Enterprises and Knight Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Werner Enterprises 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 Werner Enterprises 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.