Correlation Between Knight Transportation and Cohen

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

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

Diversification Opportunities for Knight Transportation and Cohen

0.82

Correlation Coefficient

Knight Transportation  Cohen

Very poor diversification

The 3 months correlation between Knight and Cohen is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and Cohen Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohen Company and Knight Transportation 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 Knight Transportation are associated (or correlated) with Cohen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohen Company has no effect on the direction of Knight Transportation i.e., Knight Transportation and Cohen go up and down completely randomly.

Pair Corralation between Knight Transportation and Cohen

Considering the 90-day investment horizon Knight Transportation is expected to generate 1.59 times less return on investment than Cohen. But when comparing it to its historical volatility, Knight Transportation is 1.61 times less risky than Cohen. It trades about 0.11 of its potential returns per unit of risk. Cohen Company is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  834.00  in Cohen Company on September 3, 2024 and sell it today you would earn a total of  176.00  from holding Cohen Company or generate 21.1% return on investment over 90 days.

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

Knight Transportation  vs.  Cohen Company

Knight Transportation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knight Transportation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Knight Transportation showed solid returns over the last few months and may actually be approaching a breakup point.

Cohen Company

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cohen Company are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical indicators, Cohen displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knight Transportation and Cohen

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

The idea behind Knight Transportation and Cohen Company 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.