Correlation Between WD 40 and Covenant Logistics

Can any of the company-specific risk be diversified away by investing in both WD 40 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 WD 40 and Covenant Logistics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WD 40 CO and Covenant Logistics Group, you can compare the effects of market volatilities on WD 40 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 WD 40 with a short position of Covenant Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of WD 40 and Covenant Logistics.

Diversification Opportunities for WD 40 and Covenant Logistics

0.84

Correlation Coefficient

WD 40  Covenant Logistics

Very poor diversification

The 3 months correlation between WD1 and Covenant is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding WD 40 CO and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics and WD 40 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 WD 40 CO 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 has no effect on the direction of WD 40 i.e., WD 40 and Covenant Logistics go up and down completely randomly.

Pair Corralation between WD 40 and Covenant Logistics

Assuming the 90 days trading horizon WD 40 CO is expected to under-perform the Covenant Logistics. But the stock apears to be less risky and, when comparing its historical volatility, WD 40 CO is 1.33 times less risky than Covenant Logistics. The stock trades about -0.47 of its potential returns per unit of risk. The Covenant Logistics Group is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  5,489  in Covenant Logistics Group on September 29, 2024 and sell it today you would lose (189.00) from holding Covenant Logistics Group or give up 3.44% of portfolio value over 90 days.

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

WD 40 CO  vs.  Covenant Logistics Group

WD 40 CO

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WD 40 CO are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WD 40 is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Covenant Logistics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Covenant Logistics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WD 40 and Covenant Logistics

The main advantage of trading using opposite WD 40 and Covenant Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WD 40 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 WD 40 CO 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.