Correlation Between Old Dominion and Transportadora

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

Diversification Opportunities for Old Dominion and Transportadora

-0.09

Correlation Coefficient

Old Dominion  Transportadora

Good diversification

The 3 months correlation between Old and Transportadora is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of Old Dominion i.e., Old Dominion and Transportadora go up and down completely randomly.

Pair Corralation between Old Dominion and Transportadora

Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Transportadora. But the stock apears to be less risky and, when comparing its historical volatility, Old Dominion Freight is 2.13 times less risky than Transportadora. The stock trades about -0.45 of its potential returns per unit of risk. The Transportadora de Gas is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,012  in Transportadora de Gas on October 12, 2024 and sell it today you would earn a total of  265.00  from holding Transportadora de Gas or generate 8.8% return on investment over 90 days.

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

Old Dominion Freight  vs.  Transportadora de Gas

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.

Transportadora de Gas

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Old Dominion and Transportadora

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

The idea behind Old Dominion Freight and Transportadora de Gas 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 Anywhere module to track or share privately all of your investments from the convenience of any device.