Correlation Between Afya and Old Dominion

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

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

Diversification Opportunities for Afya and Old Dominion

0.42

Correlation Coefficient

Afya  Old Dominion

Very weak diversification

The 3 months correlation between Afya and Old is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Afya 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 Afya 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 Afya 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 Afya i.e., Afya and Old Dominion go up and down completely randomly.

Pair Corralation between Afya and Old Dominion

Given the investment horizon of 90 days Afya is expected to under-perform the Old Dominion. But the stock apears to be less risky and, when comparing its historical volatility, Afya is 1.27 times less risky than Old Dominion. The stock trades about 0.0 of its potential returns per unit of risk. The Old Dominion Freight is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19,238  in Old Dominion Freight on September 13, 2024 and sell it today you would earn a total of  1,243  from holding Old Dominion Freight or generate 6.46% return on investment over 90 days.

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

Afya  vs.  Old Dominion Freight

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Afya is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Old Dominion Freight

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Old Dominion Freight are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Old Dominion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Afya and Old Dominion

The main advantage of trading using opposite Afya and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Afya 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 Afya 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.