Correlation Between Knight Transportation and Heartland Express

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

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

Diversification Opportunities for Knight Transportation and Heartland Express

0.95

Correlation Coefficient

Knight Transportation  Heartland Express

Almost no diversification

The 3 months correlation between Knight and Heartland is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and Heartland Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Express 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 Heartland Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Express has no effect on the direction of Knight Transportation i.e., Knight Transportation and Heartland Express go up and down completely randomly.

Pair Corralation between Knight Transportation and Heartland Express

Considering the 90-day investment horizon Knight Transportation is expected to under-perform the Heartland Express. But the stock apears to be less risky and, when comparing its historical volatility, Knight Transportation is 1.08 times less risky than Heartland Express. The stock trades about -0.2 of its potential returns per unit of risk. The Heartland Express is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  1,116  in Heartland Express on January 3, 2025 and sell it today you would lose (201.00) from holding Heartland Express or give up 18.01% of portfolio value over 90 days.

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

Knight Transportation  vs.  Heartland Express

Knight Transportation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knight Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Heartland Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heartland Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Knight Transportation and Heartland Express

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

The idea behind Knight Transportation and Heartland Express 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.