Correlation Between Superior Plus and Old Dominion

Can any of the company-specific risk be diversified away by investing in both Superior Plus and Old Dominion 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 Superior Plus and Old Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Superior Plus Corp and Old Dominion Freight, you can compare the effects of market volatilities on Superior Plus and Old Dominion 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 Superior Plus with a short position of Old Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Old Dominion.

Diversification Opportunities for Superior Plus and Old Dominion

-0.48

Correlation Coefficient

Superior Plus  Old Dominion

Very good diversification

The 3 months correlation between Superior and Old is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Old Dominion Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Dominion Freight and Superior Plus 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 Superior Plus Corp are associated (or correlated) with Old Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Dominion Freight has no effect on the direction of Superior Plus i.e., Superior Plus and Old Dominion go up and down completely randomly.

Pair Corralation between Superior Plus and Old Dominion

Assuming the 90 days horizon Superior Plus Corp is expected to generate 1.19 times more return on investment than Old Dominion. However, Superior Plus is 1.19 times more volatile than Old Dominion Freight. It trades about -0.23 of its potential returns per unit of risk. Old Dominion Freight is currently generating about -0.44 per unit of risk. If you would invest  449.00  in Superior Plus Corp on October 7, 2024 and sell it today you would lose (33.00) from holding Superior Plus Corp or give up 7.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Superior Plus Corp  vs.  Old Dominion Freight

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Old Dominion Freight

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Old Dominion Freight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Old Dominion is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Superior Plus and Old Dominion

The main advantage of trading using opposite Superior Plus and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus position performs unexpectedly, Old Dominion 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 Old Dominion will offset losses from the drop in Old Dominion's long position.

The idea behind Superior Plus Corp and Old Dominion Freight pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.