Correlation Between Old Dominion and Bank of America
Can any of the company-specific risk be diversified away by investing in both Old Dominion and Bank of America 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 Old Dominion and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Dominion Freight and Bank of America, you can compare the effects of market volatilities on Old Dominion and Bank of America 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 Old Dominion with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and Bank of America.
Diversification Opportunities for Old Dominion and Bank of America
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Old and Bank is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and Old Dominion 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 Old Dominion Freight are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Old Dominion i.e., Old Dominion and Bank of America go up and down completely randomly.
Pair Corralation between Old Dominion and Bank of America
Given the investment horizon of 90 days Old Dominion Freight is expected to generate 2.82 times more return on investment than Bank of America. However, Old Dominion is 2.82 times more volatile than Bank of America. It trades about 0.05 of its potential returns per unit of risk. Bank of America is currently generating about 0.09 per unit of risk. If you would invest 14,964 in Old Dominion Freight on September 2, 2024 and sell it today you would earn a total of 7,550 from holding Old Dominion Freight or generate 50.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Dominion Freight vs. Bank of America
Performance |
| Timeline |
| Old Dominion Freight |
| Bank of America |
Old Dominion and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Dominion and Bank of America
The main advantage of trading using opposite Old Dominion and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Old Dominion vs. ArcBest Corp | Old Dominion vs. Marten Transport | Old Dominion vs. Werner Enterprises | Old Dominion vs. Knight Transportation |
| Bank of America vs. Bank of America | Bank of America vs. Bank of America | Bank of America vs. China Construction Bank | Bank of America vs. Bank of America |
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.
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