Correlation Between Knight Transportation and Himalaya Shipping

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

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

Diversification Opportunities for Knight Transportation and Himalaya Shipping

0.4

Correlation Coefficient

Knight Transportation  Himalaya Shipping

Very weak diversification

The 3 months correlation between Knight and Himalaya is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and Himalaya Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Himalaya Shipping 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 Himalaya Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Himalaya Shipping has no effect on the direction of Knight Transportation i.e., Knight Transportation and Himalaya Shipping go up and down completely randomly.

Pair Corralation between Knight Transportation and Himalaya Shipping

Considering the 90-day investment horizon Knight Transportation is expected to generate 8.87 times less return on investment than Himalaya Shipping. But when comparing it to its historical volatility, Knight Transportation is 1.04 times less risky than Himalaya Shipping. It trades about 0.02 of its potential returns per unit of risk. Himalaya Shipping is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  537.00  in Himalaya Shipping on May 7, 2025 and sell it today you would earn a total of  152.00  from holding Himalaya Shipping or generate 28.31% return on investment over 90 days.

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

Knight Transportation  vs.  Himalaya Shipping

Knight Transportation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Knight Transportation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Knight Transportation is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Himalaya Shipping

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Himalaya Shipping are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical indicators, Himalaya Shipping reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knight Transportation and Himalaya Shipping

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

The idea behind Knight Transportation and Himalaya Shipping 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.