Correlation Between Dycom Industries and Knight Transportation

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

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

Diversification Opportunities for Dycom Industries and Knight Transportation

0.74

Correlation Coefficient

Dycom Industries  Knight Transportation

Poor diversification

The 3 months correlation between Dycom and Knight is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dycom Industries and Knight Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Transportation and Dycom Industries 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 Dycom Industries are associated (or correlated) with Knight Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Transportation has no effect on the direction of Dycom Industries i.e., Dycom Industries and Knight Transportation go up and down completely randomly.

Pair Corralation between Dycom Industries and Knight Transportation

Allowing for the 90-day total investment horizon Dycom Industries is expected to generate 1.01 times more return on investment than Knight Transportation. However, Dycom Industries is 1.01 times more volatile than Knight Transportation. It trades about 0.33 of its potential returns per unit of risk. Knight Transportation is currently generating about 0.1 per unit of risk. If you would invest  16,755  in Dycom Industries on April 30, 2025 and sell it today you would earn a total of  9,672  from holding Dycom Industries or generate 57.73% return on investment over 90 days.

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

Dycom Industries  vs.  Knight Transportation

Dycom Industries

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dycom Industries are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish basic indicators, Dycom Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Knight Transportation

Risk-Adjusted Performance

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.

Pair Trading with Dycom Industries and Knight Transportation

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

The idea behind Dycom Industries and Knight Transportation 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.