Correlation Between Old Dominion and Kinsale Capital

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

Diversification Opportunities for Old Dominion and Kinsale Capital

0.25

Correlation Coefficient

Old Dominion  Kinsale Capital

Modest diversification

The 3 months correlation between Old and Kinsale is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Kinsale Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinsale Capital Group 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 Kinsale Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinsale Capital Group has no effect on the direction of Old Dominion i.e., Old Dominion and Kinsale Capital go up and down completely randomly.

Pair Corralation between Old Dominion and Kinsale Capital

Given the investment horizon of 90 days Old Dominion is expected to generate 2.73 times less return on investment than Kinsale Capital. But when comparing it to its historical volatility, Old Dominion Freight is 1.21 times less risky than Kinsale Capital. It trades about 0.02 of its potential returns per unit of risk. Kinsale Capital Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  29,015  in Kinsale Capital Group on October 4, 2024 and sell it today you would earn a total of  16,581  from holding Kinsale Capital Group or generate 57.15% return on investment over 90 days.

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

Old Dominion Freight  vs.  Kinsale Capital Group

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 latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Kinsale Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinsale Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kinsale Capital is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Old Dominion and Kinsale Capital

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

The idea behind Old Dominion Freight and Kinsale Capital Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.