Correlation Between Heartland Express and ArcBest

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

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

Diversification Opportunities for Heartland Express and ArcBest

0.79

Correlation Coefficient

Heartland Express  ArcBest

Poor diversification

The 3 months correlation between Heartland and ArcBest is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Express and ArcBest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcBest and Heartland Express 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 Heartland Express are associated (or correlated) with ArcBest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcBest has no effect on the direction of Heartland Express i.e., Heartland Express and ArcBest go up and down completely randomly.

Pair Corralation between Heartland Express and ArcBest

Assuming the 90 days horizon Heartland Express is expected to generate 0.65 times more return on investment than ArcBest. However, Heartland Express is 1.54 times less risky than ArcBest. It trades about 0.02 of its potential returns per unit of risk. ArcBest is currently generating about -0.04 per unit of risk. If you would invest  1,068  in Heartland Express on September 26, 2024 and sell it today you would earn a total of  12.00  from holding Heartland Express or generate 1.12% return on investment over 90 days.

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

Heartland Express  vs.  ArcBest

Heartland Express

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Express are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Heartland Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 fragile 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.

Pair Trading with Heartland Express and ArcBest

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

The idea behind Heartland Express and ArcBest 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.