Correlation Between Old Dominion and BANCO

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

Diversification Opportunities for Old Dominion and BANCO

0.32

Correlation Coefficient

Old Dominion  BANCO

Weak diversification

The 3 months correlation between Old and BANCO is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and BANCO SANTANDER SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANCO SANTANDER SA 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 BANCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANCO SANTANDER SA has no effect on the direction of Old Dominion i.e., Old Dominion and BANCO go up and down completely randomly.

Pair Corralation between Old Dominion and BANCO

Given the investment horizon of 90 days Old Dominion is expected to generate 85.28 times less return on investment than BANCO. But when comparing it to its historical volatility, Old Dominion Freight is 25.05 times less risky than BANCO. It trades about 0.01 of its potential returns per unit of risk. BANCO SANTANDER SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,102  in BANCO SANTANDER SA on October 24, 2024 and sell it today you would earn a total of  260.00  from holding BANCO SANTANDER SA or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.38%
Values	Daily Returns

Old Dominion Freight  vs.  BANCO SANTANDER SA

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 quite persistent technical and fundamental indicators, Old Dominion is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

BANCO SANTANDER SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BANCO SANTANDER SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BANCO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Old Dominion and BANCO

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

The idea behind Old Dominion Freight and BANCO SANTANDER SA 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.