Correlation Between Universal Logistics and RXO

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

By analyzing existing cross correlation between Universal Logistics Holdings and RXO Inc, you can compare the effects of market volatilities on Universal Logistics and RXO 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 Universal Logistics with a short position of RXO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Logistics and RXO.

Diversification Opportunities for Universal Logistics and RXO

0.25

Correlation Coefficient

Universal Logistics  RXO

Modest diversification

The 3 months correlation between Universal and RXO is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Universal Logistics Holdings and RXO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RXO Inc and Universal Logistics 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 Universal Logistics Holdings are associated (or correlated) with RXO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RXO Inc has no effect on the direction of Universal Logistics i.e., Universal Logistics and RXO go up and down completely randomly.

Pair Corralation between Universal Logistics and RXO

Considering the 90-day investment horizon Universal Logistics is expected to generate 1.01 times less return on investment than RXO. In addition to that, Universal Logistics is 1.24 times more volatile than RXO Inc. It trades about 0.04 of its total potential returns per unit of risk. RXO Inc is currently generating about 0.05 per unit of volatility. If you would invest  1,798  in RXO Inc on August 24, 2024 and sell it today you would earn a total of  1,038  from holding RXO Inc or generate 57.73% return on investment over 90 days.

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

Universal Logistics Holdings  vs.  RXO Inc

Universal Logistics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Logistics Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent essential indicators, Universal Logistics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

RXO Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RXO Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, RXO is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Universal Logistics and RXO

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

The idea behind Universal Logistics Holdings and RXO Inc 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.