Correlation Between Old Dominion and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Old Dominion and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Old Dominion and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and Dow Jones.
Diversification Opportunities for Old Dominion and Dow Jones
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Old and Dow is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Old Dominion i.e., Old Dominion and Dow Jones go up and down completely randomly.
Pair Corralation between Old Dominion and Dow Jones
Given the investment horizon of 90 days Old Dominion Freight is expected to generate 3.0 times more return on investment than Dow Jones. However, Old Dominion is 3.0 times more volatile than Dow Jones Industrial. It trades about 0.16 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.22 per unit of risk. If you would invest 20,088 in Old Dominion Freight on August 27, 2024 and sell it today you would earn a total of 1,937 from holding Old Dominion Freight or generate 9.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Dominion Freight vs. Dow Jones Industrial
Performance |
| Timeline |
Old Dominion and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Old Dominion Freight
Pair trading matchups for Old Dominion
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Old Dominion and Dow Jones
The main advantage of trading using opposite Old Dominion and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Old Dominion vs. ArcBest Corp | Old Dominion vs. Marten Transport | Old Dominion vs. Werner Enterprises | Old Dominion vs. Knight Transportation |
| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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