Correlation Between Old Dominion and P A

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

Diversification Opportunities for Old Dominion and P A

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Old Dominion and P A is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and P A M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on P A M 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 P A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of P A M has no effect on the direction of Old Dominion i.e., Old Dominion and P A go up and down completely randomly.

Pair Corralation between Old Dominion and P A

Given the investment horizon of 90 days Old Dominion is expected to generate 1.06 times less return on investment than P A. But when comparing it to its historical volatility, Old Dominion Freight is 1.23 times less risky than P A. It trades about 0.19 of its potential returns per unit of risk. P A M is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,174  in P A M on May 21, 2022 and sell it today you would earn a total of  332.00  from holding P A M or generate 10.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.65%
ValuesDaily Returns

Old Dominion Freight  vs.  P A M

 Performance (%) 
       Timeline  
Old Dominion Freight 
Old Dominion Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Old Dominion Freight are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Old Dominion revealed solid returns over the last few months and may actually be approaching a breakup point.

Old Dominion Price Channel

P A M 
P A Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in P A M are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, P A reported solid returns over the last few months and may actually be approaching a breakup point.

P A Price Channel

Old Dominion and P A Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Old Dominion and P A

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

P A M

Pair trading matchups for P A

Check out your portfolio center. 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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