Correlation Between REVLTNRY CNCPT and Covenant Logistics

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

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

Diversification Opportunities for REVLTNRY CNCPT and Covenant Logistics

-0.33

Correlation Coefficient

REVLTNRY CNCPT  Covenant Logistics

Very good diversification

The 3 months correlation between REVLTNRY and Covenant is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding REVLTNRY CNCPT and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics and REVLTNRY CNCPT 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 REVLTNRY CNCPT 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 has no effect on the direction of REVLTNRY CNCPT i.e., REVLTNRY CNCPT and Covenant Logistics go up and down completely randomly.

Pair Corralation between REVLTNRY CNCPT and Covenant Logistics

Assuming the 90 days trading horizon REVLTNRY CNCPT is expected to generate 101.54 times more return on investment than Covenant Logistics. However, REVLTNRY CNCPT is 101.54 times more volatile than Covenant Logistics Group. It trades about 0.2 of its potential returns per unit of risk. Covenant Logistics Group is currently generating about 0.1 per unit of risk. If you would invest  0.50  in REVLTNRY CNCPT on September 29, 2024 and sell it today you would earn a total of  0.05  from holding REVLTNRY CNCPT or generate 10.0% return on investment over 90 days.

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

REVLTNRY CNCPT  vs.  Covenant Logistics Group

REVLTNRY CNCPT

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in REVLTNRY CNCPT are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, REVLTNRY CNCPT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Covenant Logistics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Covenant Logistics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REVLTNRY CNCPT and Covenant Logistics

The main advantage of trading using opposite REVLTNRY CNCPT and Covenant Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REVLTNRY CNCPT 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 REVLTNRY CNCPT 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..