Correlation Between Old Dominion and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Old Dominion and Arrow Electronics 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 Electronics 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 Electronics, you can compare the effects of market volatilities on Old Dominion and Arrow Electronics 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 Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and Arrow Electronics.
Diversification Opportunities for Old Dominion and Arrow Electronics
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Old and Arrow is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics 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 Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Old Dominion i.e., Old Dominion and Arrow Electronics go up and down completely randomly.
Pair Corralation between Old Dominion and Arrow Electronics
Given the investment horizon of 90 days Old Dominion Freight is expected to generate 1.28 times more return on investment than Arrow Electronics. However, Old Dominion is 1.28 times more volatile than Arrow Electronics. It trades about 0.04 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.02 per unit of risk. If you would invest 13,991 in Old Dominion Freight on September 24, 2024 and sell it today you would earn a total of 4,146 from holding Old Dominion Freight or generate 29.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Old Dominion Freight vs. Arrow Electronics
Performance |
Timeline |
Old Dominion Freight |
Arrow Electronics |
Old Dominion and Arrow Electronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Old Dominion and Arrow Electronics
The main advantage of trading using opposite Old Dominion and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion position performs unexpectedly, Arrow Electronics 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 Electronics will offset losses from the drop in Arrow Electronics' long position.Old Dominion vs. Marten Transport | Old Dominion vs. Werner Enterprises | Old Dominion vs. Universal Logistics Holdings | Old Dominion vs. Schneider National |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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