Correlation Between Old Dominion and Arrow Financial

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

Diversification Opportunities for Old Dominion and Arrow Financial

0.89

Correlation Coefficient

Old Dominion  Arrow Financial

Very poor diversification

The 3 months correlation between Old and Arrow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial 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 Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Old Dominion i.e., Old Dominion and Arrow Financial go up and down completely randomly.

Pair Corralation between Old Dominion and Arrow Financial

Given the investment horizon of 90 days Old Dominion is expected to generate 3.43 times less return on investment than Arrow Financial. But when comparing it to its historical volatility, Old Dominion Freight is 1.04 times less risky than Arrow Financial. It trades about 0.02 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,930  in Arrow Financial on September 18, 2024 and sell it today you would earn a total of  248.00  from holding Arrow Financial or generate 8.46% return on investment over 90 days.

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

Old Dominion Freight  vs.  Arrow Financial

Old Dominion Freight

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Old Dominion Freight are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Old Dominion is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Arrow Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Arrow Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Old Dominion and Arrow Financial

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

The idea behind Old Dominion Freight and Arrow Financial 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.