Correlation Between Knight Transportation and REQ

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

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

Diversification Opportunities for Knight Transportation and REQ

0.49

Correlation Coefficient

Knight Transportation  REQ

Very weak diversification

The 3 months correlation between Knight and REQ is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and REQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REQ 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 REQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REQ has no effect on the direction of Knight Transportation i.e., Knight Transportation and REQ go up and down completely randomly.

Pair Corralation between Knight Transportation and REQ

Considering the 90-day investment horizon Knight Transportation is expected to generate 3.55 times less return on investment than REQ. But when comparing it to its historical volatility, Knight Transportation is 2.54 times less risky than REQ. It trades about 0.1 of its potential returns per unit of risk. REQ is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9.71  in REQ on September 4, 2024 and sell it today you would earn a total of  4.29  from holding REQ or generate 44.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Knight Transportation  vs.  REQ

Knight Transportation

Risk-Adjusted Performance

7 of 100

OK

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

REQ

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REQ are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, REQ exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knight Transportation and REQ

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

The idea behind Knight Transportation and REQ 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.