Correlation Between Old Dominion and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Old Dominion and Southwest Airlines 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 Southwest Airlines 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 Southwest Airlines, you can compare the effects of market volatilities on Old Dominion and Southwest Airlines 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 Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and Southwest Airlines.
Diversification Opportunities for Old Dominion and Southwest Airlines
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Old and Southwest is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Old Dominion i.e., Old Dominion and Southwest Airlines go up and down completely randomly.
Pair Corralation between Old Dominion and Southwest Airlines
Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Southwest Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Old Dominion Freight is 1.14 times less risky than Southwest Airlines. The stock trades about -0.02 of its potential returns per unit of risk. The Southwest Airlines is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,851 in Southwest Airlines on January 12, 2025 and sell it today you would lose (232.00) from holding Southwest Airlines or give up 8.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Dominion Freight vs. Southwest Airlines
Performance |
| Timeline |
| Old Dominion Freight |
| Southwest Airlines |
Old Dominion and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Dominion and Southwest Airlines
The main advantage of trading using opposite Old Dominion and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| Old Dominion vs. ArcBest Corp | Old Dominion vs. Marten Transport | Old Dominion vs. Werner Enterprises | Old Dominion vs. Knight Transportation |
| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Delta Air Lines |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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