Correlation Between Old Dominion and Marten Transport

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

Diversification Opportunities for Old Dominion and Marten Transport

0.34

Correlation Coefficient

Old Dominion  Marten Transport

Weak diversification

The 3 months correlation between Old and Marten is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Marten Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marten Transport 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 Marten Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marten Transport has no effect on the direction of Old Dominion i.e., Old Dominion and Marten Transport go up and down completely randomly.

Pair Corralation between Old Dominion and Marten Transport

Given the investment horizon of 90 days Old Dominion Freight is expected to generate 1.25 times more return on investment than Marten Transport. However, Old Dominion is 1.25 times more volatile than Marten Transport. It trades about 0.05 of its potential returns per unit of risk. Marten Transport is currently generating about -0.01 per unit of risk. If you would invest  15,105  in Old Dominion Freight on September 3, 2024 and sell it today you would earn a total of  7,409  from holding Old Dominion Freight or generate 49.05% 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.  Marten Transport

Old Dominion Freight

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Old Dominion Freight are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Old Dominion disclosed solid returns over the last few months and may actually be approaching a breakup point.

Marten Transport

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marten Transport are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Marten Transport is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Old Dominion and Marten Transport

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

The idea behind Old Dominion Freight and Marten Transport 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.