Correlation Between Arrow Financial and Old Dominion

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

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

Diversification Opportunities for Arrow Financial and Old Dominion

0.89

Correlation Coefficient

Arrow Financial  Old Dominion

Very poor diversification

The 3 months correlation between Arrow and Old is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial 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 Arrow Financial 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 Arrow Financial 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 Arrow Financial i.e., Arrow Financial and Old Dominion go up and down completely randomly.

Pair Corralation between Arrow Financial and Old Dominion

Given the investment horizon of 90 days Arrow Financial is expected to under-perform the Old Dominion. In addition to that, Arrow Financial is 1.11 times more volatile than Old Dominion Freight. It trades about -0.12 of its total potential returns per unit of risk. Old Dominion Freight is currently generating about 0.04 per unit of volatility. If you would invest  18,774  in Old Dominion Freight on October 20, 2024 and sell it today you would earn a total of  181.00  from holding Old Dominion Freight or generate 0.96% return on investment over 90 days.

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

Arrow Financial  vs.  Old Dominion Freight

Arrow Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Arrow Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 quite persistent technical and fundamental indicators, Old Dominion is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Arrow Financial and Old Dominion

The main advantage of trading using opposite Arrow Financial and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Financial 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 Arrow Financial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.