Correlation Between Knight Transportation and Marten Transport

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

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

Diversification Opportunities for Knight Transportation and Marten Transport

0.91

Correlation Coefficient

Knight Transportation  Marten Transport

Almost no diversification

The 3 months correlation between Knight and Marten is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Knight Transportation and Marten Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marten Transport 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 Marten Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marten Transport has no effect on the direction of Knight Transportation i.e., Knight Transportation and Marten Transport go up and down completely randomly.

Pair Corralation between Knight Transportation and Marten Transport

Considering the 90-day investment horizon Knight Transportation is expected to generate 1.12 times more return on investment than Marten Transport. However, Knight Transportation is 1.12 times more volatile than Marten Transport. It trades about -0.02 of its potential returns per unit of risk. Marten Transport is currently generating about -0.04 per unit of risk. If you would invest  5,447  in Knight Transportation on January 3, 2025 and sell it today you would lose (1,071) from holding Knight Transportation or give up 19.66% 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.  Marten Transport

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.

Marten Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marten Transport 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 basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Knight Transportation and Marten Transport

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

The idea behind Knight Transportation and Marten Transport 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.