Correlation Between Old Dominion and Heartland Express

Can any of the company-specific risk be diversified away by investing in both Old Dominion and Heartland Express 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 Heartland Express 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 Heartland Express, you can compare the effects of market volatilities on Old Dominion and Heartland Express 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 Heartland Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and Heartland Express.

Diversification Opportunities for Old Dominion and Heartland Express

0.73

Correlation Coefficient

Old Dominion  Heartland Express

Poor diversification

The 3 months correlation between Old and Heartland is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Heartland Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Express 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 Heartland Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Express has no effect on the direction of Old Dominion i.e., Old Dominion and Heartland Express go up and down completely randomly.

Pair Corralation between Old Dominion and Heartland Express

Assuming the 90 days horizon Old Dominion Freight is expected to generate 1.33 times more return on investment than Heartland Express. However, Old Dominion is 1.33 times more volatile than Heartland Express. It trades about 0.03 of its potential returns per unit of risk. Heartland Express is currently generating about -0.03 per unit of risk. If you would invest  14,233  in Old Dominion Freight on September 28, 2024 and sell it today you would earn a total of  3,177  from holding Old Dominion Freight or generate 22.32% return on investment over 90 days.

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

Old Dominion Freight  vs.  Heartland Express

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.

Heartland Express

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Old Dominion and Heartland Express

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

The idea behind Old Dominion Freight and Heartland Express 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.