Correlation Between Knight Transportation and Ionet

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

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

Diversification Opportunities for Knight Transportation and Ionet

0.78

Correlation Coefficient

Knight Transportation  Ionet

Poor diversification

The 3 months correlation between Knight and Ionet is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and ionet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ionet 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 Ionet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ionet has no effect on the direction of Knight Transportation i.e., Knight Transportation and Ionet go up and down completely randomly.

Pair Corralation between Knight Transportation and Ionet

Considering the 90-day investment horizon Knight Transportation is expected to generate 7.11 times less return on investment than Ionet. But when comparing it to its historical volatility, Knight Transportation is 3.69 times less risky than Ionet. It trades about 0.11 of its potential returns per unit of risk. ionet is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  150.00  in ionet on September 3, 2024 and sell it today you would earn a total of  197.00  from holding ionet or generate 131.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Knight Transportation  vs.  ionet

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.

ionet

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ionet are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ionet exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knight Transportation and Ionet

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

The idea behind Knight Transportation and ionet 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.