Correlation Between Schneider National and Covenant Logistics

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

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

Diversification Opportunities for Schneider National and Covenant Logistics

0.86

Correlation Coefficient

Schneider National  Covenant Logistics

Very poor diversification

The 3 months correlation between Schneider and Covenant is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Schneider National and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics and Schneider National 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 Schneider National are associated (or correlated) with Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics has no effect on the direction of Schneider National i.e., Schneider National and Covenant Logistics go up and down completely randomly.

Pair Corralation between Schneider National and Covenant Logistics

Given the investment horizon of 90 days Schneider National is expected to under-perform the Covenant Logistics. In addition to that, Schneider National is 1.34 times more volatile than Covenant Logistics Group. It trades about -0.06 of its total potential returns per unit of risk. Covenant Logistics Group is currently generating about -0.03 per unit of volatility. If you would invest  4,600  in Covenant Logistics Group on February 5, 2024 and sell it today you would lose (46.00) from holding Covenant Logistics Group or give up 1.0% of portfolio value over 90 days.

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

Schneider National  vs.  Covenant Logistics Group

Schneider National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schneider National has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Covenant Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Covenant Logistics Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Schneider National and Covenant Logistics

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

The idea behind Schneider National and Covenant Logistics Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.