Correlation Between John Wiley and Old Dominion

Can any of the company-specific risk be diversified away by investing in both John Wiley and Old Dominion 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 John Wiley and Old Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between John Wiley Sons and Old Dominion Freight, you can compare the effects of market volatilities on John Wiley and Old Dominion 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 John Wiley with a short position of Old Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Wiley and Old Dominion.

Diversification Opportunities for John Wiley and Old Dominion

0.34

Correlation Coefficient

John Wiley  Old Dominion

Weak diversification

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

Pair Corralation between John Wiley and Old Dominion

Given the investment horizon of 90 days John Wiley is expected to generate 16.83 times less return on investment than Old Dominion. But when comparing it to its historical volatility, John Wiley Sons is 1.39 times less risky than Old Dominion. It trades about 0.0 of its potential returns per unit of risk. Old Dominion Freight is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19,238  in Old Dominion Freight on September 13, 2024 and sell it today you would earn a total of  1,243  from holding Old Dominion Freight or generate 6.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	77.78%
Values	Daily Returns

John Wiley Sons  vs.  Old Dominion Freight

John Wiley Sons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days John Wiley Sons has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, John Wiley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Old Dominion Freight

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Old Dominion Freight are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Old Dominion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with John Wiley and Old Dominion

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

The idea behind John Wiley Sons and Old Dominion Freight 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.