Correlation Between Old Dominion and United Guardian
Can any of the company-specific risk be diversified away by investing in both Old Dominion and United Guardian 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 United Guardian 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 United Guardian, you can compare the effects of market volatilities on Old Dominion and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and United Guardian.
Diversification Opportunities for Old Dominion and United Guardian
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Old and United is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Old Dominion i.e., Old Dominion and United Guardian go up and down completely randomly.
Pair Corralation between Old Dominion and United Guardian
Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the United Guardian. In addition to that, Old Dominion is 1.32 times more volatile than United Guardian. It trades about -0.12 of its total potential returns per unit of risk. United Guardian is currently generating about -0.02 per unit of volatility. If you would invest 1,053 in United Guardian on November 28, 2024 and sell it today you would lose (16.00) from holding United Guardian or give up 1.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Old Dominion Freight vs. United Guardian
Performance |
| Timeline |
| Old Dominion Freight |
| United Guardian |
Old Dominion and United Guardian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Dominion and United Guardian
The main advantage of trading using opposite Old Dominion and United Guardian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion position performs unexpectedly, United Guardian 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 United Guardian will offset losses from the drop in United Guardian's long position.| Old Dominion vs. ArcBest Corp | Old Dominion vs. Marten Transport | Old Dominion vs. Werner Enterprises | Old Dominion vs. Knight Transportation |
| United Guardian vs. Utah Medical Products | United Guardian vs. Union Bankshares | United Guardian vs. Unity Bancorp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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