Correlation Between Bridgford Foods and Old Dominion

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

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

Diversification Opportunities for Bridgford Foods and Old Dominion

0.21

Correlation Coefficient

Bridgford Foods  Old Dominion

Modest diversification

The 3 months correlation between Bridgford and Old is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bridgford Foods 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 Bridgford Foods 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 Bridgford Foods 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 Bridgford Foods i.e., Bridgford Foods and Old Dominion go up and down completely randomly.

Pair Corralation between Bridgford Foods and Old Dominion

Given the investment horizon of 90 days Bridgford Foods is expected to under-perform the Old Dominion. But the stock apears to be less risky and, when comparing its historical volatility, Bridgford Foods is 1.4 times less risky than Old Dominion. The stock trades about -0.15 of its potential returns per unit of risk. The Old Dominion Freight is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  17,994  in Old Dominion Freight on December 27, 2024 and sell it today you would lose (1,127) from holding Old Dominion Freight or give up 6.26% of portfolio value over 90 days.

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

Bridgford Foods  vs.  Old Dominion Freight

Bridgford Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bridgford Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Old Dominion Freight

Risk-Adjusted Performance

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 Bridgford Foods and Old Dominion

The main advantage of trading using opposite Bridgford Foods and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgford Foods 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 Bridgford Foods 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.