Correlation Between Old Dominion and Viking Holdings

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

Diversification Opportunities for Old Dominion and Viking Holdings

0.31

Correlation Coefficient

Old Dominion  Viking Holdings

Weak diversification

The 3 months correlation between Old and Viking is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Viking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viking Holdings 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 Viking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viking Holdings has no effect on the direction of Old Dominion i.e., Old Dominion and Viking Holdings go up and down completely randomly.

Pair Corralation between Old Dominion and Viking Holdings

Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Viking Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Old Dominion Freight is 1.59 times less risky than Viking Holdings. The stock trades about -0.44 of its potential returns per unit of risk. The Viking Holdings is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,459  in Viking Holdings on October 11, 2024 and sell it today you would lose (154.00) from holding Viking Holdings or give up 3.45% of portfolio value over 90 days.

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

Old Dominion Freight  vs.  Viking Holdings

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.

Viking Holdings

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Old Dominion and Viking Holdings

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

The idea behind Old Dominion Freight and Viking Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.