Correlation Between Midland States and Covenant Logistics

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

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

Diversification Opportunities for Midland States and Covenant Logistics

0.87

Correlation Coefficient

Midland States  Covenant Logistics

Very poor diversification

The 3 months correlation between Midland and Covenant is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Midland States Bancorp and Covenant Logistics Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics Group, and Midland States 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 Midland States Bancorp are associated (or correlated) with Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics Group, has no effect on the direction of Midland States i.e., Midland States and Covenant Logistics go up and down completely randomly.

Pair Corralation between Midland States and Covenant Logistics

Given the investment horizon of 90 days Midland States Bancorp is expected to under-perform the Covenant Logistics. In addition to that, Midland States is 1.43 times more volatile than Covenant Logistics Group,. It trades about -0.19 of its total potential returns per unit of risk. Covenant Logistics Group, is currently generating about -0.01 per unit of volatility. If you would invest  5,733  in Covenant Logistics Group, on September 20, 2024 and sell it today you would lose (15.00) from holding Covenant Logistics Group, or give up 0.26% of portfolio value over 90 days.

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

Midland States Bancorp  vs.  Covenant Logistics Group,

Midland States Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Midland States Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, Midland States may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Covenant Logistics Group,

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating essential indicators, Covenant Logistics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Midland States and Covenant Logistics

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

The idea behind Midland States Bancorp and Covenant Logistics Group, 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.