Correlation Between Old Dominion and ArcBest Corp

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

Diversification Opportunities for Old Dominion and ArcBest Corp

0.75

Correlation Coefficient

Old Dominion  ArcBest Corp

Poor diversification

The 3 months correlation between Old and ArcBest is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and ArcBest Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcBest Corp 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 ArcBest Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcBest Corp has no effect on the direction of Old Dominion i.e., Old Dominion and ArcBest Corp go up and down completely randomly.

Pair Corralation between Old Dominion and ArcBest Corp

Given the investment horizon of 90 days Old Dominion Freight is expected to generate 0.96 times more return on investment than ArcBest Corp. However, Old Dominion Freight is 1.05 times less risky than ArcBest Corp. It trades about -0.17 of its potential returns per unit of risk. ArcBest Corp is currently generating about -0.24 per unit of risk. If you would invest  22,487  in Old Dominion Freight on November 28, 2024 and sell it today you would lose (4,499) from holding Old Dominion Freight or give up 20.01% of portfolio value over 90 days.

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

Old Dominion Freight  vs.  ArcBest Corp

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

ArcBest Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ArcBest Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Old Dominion and ArcBest Corp

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

The idea behind Old Dominion Freight and ArcBest Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.