Correlation Between Covenant Logistics and Rail Vision

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

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

Diversification Opportunities for Covenant Logistics and Rail Vision

0.16

Correlation Coefficient

Covenant Logistics  Rail Vision

Average diversification

The 3 months correlation between Covenant and Rail is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Covenant Logistics Group, and Rail Vision Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rail Vision and Covenant Logistics 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 Covenant Logistics Group, are associated (or correlated) with Rail Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rail Vision has no effect on the direction of Covenant Logistics i.e., Covenant Logistics and Rail Vision go up and down completely randomly.

Pair Corralation between Covenant Logistics and Rail Vision

Given the investment horizon of 90 days Covenant Logistics is expected to generate 110.3 times less return on investment than Rail Vision. But when comparing it to its historical volatility, Covenant Logistics Group, is 25.13 times less risky than Rail Vision. It trades about 0.01 of its potential returns per unit of risk. Rail Vision Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Rail Vision Ltd on September 16, 2024 and sell it today you would lose (2.00) from holding Rail Vision Ltd or give up 30.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

Covenant Logistics Group,  vs.  Rail Vision Ltd

Covenant Logistics Group,

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 inconsistent essential indicators, Covenant Logistics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rail Vision

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rail Vision Ltd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Rail Vision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Covenant Logistics and Rail Vision

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

The idea behind Covenant Logistics Group, and Rail Vision Ltd 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.