Correlation Between ArcBest and Covenant Logistics

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

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

Diversification Opportunities for ArcBest and Covenant Logistics

0.84

Correlation Coefficient

ArcBest  Covenant Logistics

Very poor diversification

The 3 months correlation between ArcBest and Covenant is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ArcBest and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics and ArcBest 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 ArcBest 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 ArcBest i.e., ArcBest and Covenant Logistics go up and down completely randomly.

Pair Corralation between ArcBest and Covenant Logistics

Assuming the 90 days horizon ArcBest is expected to under-perform the Covenant Logistics. In addition to that, ArcBest is 1.49 times more volatile than Covenant Logistics Group. It trades about -0.03 of its total potential returns per unit of risk. Covenant Logistics Group is currently generating about 0.09 per unit of volatility. If you would invest  4,710  in Covenant Logistics Group on September 28, 2024 and sell it today you would earn a total of  490.00  from holding Covenant Logistics Group or generate 10.4% return on investment over 90 days.

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

ArcBest  vs.  Covenant Logistics Group

ArcBest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcBest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Covenant Logistics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Covenant Logistics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ArcBest and Covenant Logistics

The main advantage of trading using opposite ArcBest and Covenant Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcBest 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 ArcBest 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.