Correlation Between Old Dominion and DOW JONES

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

Diversification Opportunities for Old Dominion and DOW JONES

0.0

Correlation Coefficient

Old Dominion  DOW JONES

Pay attention - limited upside

The 3 months correlation between Old and DOW is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and DOW JONES EQUITY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW JONES EQUITY 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 DOW JONES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW JONES EQUITY has no effect on the direction of Old Dominion i.e., Old Dominion and DOW JONES go up and down completely randomly.

Pair Corralation between Old Dominion and DOW JONES

If you would invest  16,503  in Old Dominion Freight on October 22, 2024 and sell it today you would earn a total of  2,452  from holding Old Dominion Freight or generate 14.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Old Dominion Freight  vs.  DOW JONES EQUITY

Pair Trading with Old Dominion and DOW JONES

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

The idea behind Old Dominion Freight and DOW JONES EQUITY 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.