Correlation Between Old Dominion and Hafnia

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

Diversification Opportunities for Old Dominion and Hafnia

-0.11

Correlation Coefficient

Old Dominion  Hafnia

Good diversification

The 3 months correlation between Old and Hafnia is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Old Dominion i.e., Old Dominion and Hafnia go up and down completely randomly.

Pair Corralation between Old Dominion and Hafnia

Given the investment horizon of 90 days Old Dominion Freight is expected to generate 0.78 times more return on investment than Hafnia. However, Old Dominion Freight is 1.28 times less risky than Hafnia. It trades about -0.08 of its potential returns per unit of risk. Hafnia Limited is currently generating about -0.34 per unit of risk. If you would invest  18,678  in Old Dominion Freight on December 1, 2024 and sell it today you would lose (1,028) from holding Old Dominion Freight or give up 5.5% of portfolio value over 90 days.

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

Old Dominion Freight  vs.  Hafnia Limited

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Hafnia Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hafnia Limited 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Old Dominion and Hafnia

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

The idea behind Old Dominion Freight and Hafnia Limited 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.