Correlation Between Old Dominion and Raytech Holding
Can any of the company-specific risk be diversified away by investing in both Old Dominion and Raytech Holding 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 Raytech Holding 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 Raytech Holding Limited, you can compare the effects of market volatilities on Old Dominion and Raytech Holding 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 Raytech Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and Raytech Holding.
Diversification Opportunities for Old Dominion and Raytech Holding
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Old and Raytech is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Raytech Holding Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytech Holding 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 Raytech Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytech Holding has no effect on the direction of Old Dominion i.e., Old Dominion and Raytech Holding go up and down completely randomly.
Pair Corralation between Old Dominion and Raytech Holding
Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Raytech Holding. But the stock apears to be less risky and, when comparing its historical volatility, Old Dominion Freight is 1.14 times less risky than Raytech Holding. The stock trades about -0.08 of its potential returns per unit of risk. The Raytech Holding Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 123.00 in Raytech Holding Limited on November 25, 2024 and sell it today you would lose (3.00) from holding Raytech Holding Limited or give up 2.44% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Old Dominion Freight vs. Raytech Holding Limited
Performance |
Timeline |
Old Dominion Freight |
Raytech Holding |
Old Dominion and Raytech Holding Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Old Dominion and Raytech Holding
The main advantage of trading using opposite Old Dominion and Raytech Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion position performs unexpectedly, Raytech Holding 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 Raytech Holding will offset losses from the drop in Raytech Holding's long position.Old Dominion vs. ArcBest Corp | ||
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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