Correlation Between P A and Old Dominion

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Can any of the company-specific risk be diversified away by investing in both P A 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 P A and Old Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between P A M and Old Dominion Freight, you can compare the effects of market volatilities on P A 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 P A with a short position of Old Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of P A and Old Dominion.

Diversification Opportunities for P A and Old Dominion

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between P A and Old Dominion is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding P A M 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 P A 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 P A M 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 P A i.e., P A and Old Dominion go up and down completely randomly.

Pair Corralation between P A and Old Dominion

Given the investment horizon of 90 days P A M is expected to generate 1.86 times more return on investment than Old Dominion. However, P A is 1.86 times more volatile than Old Dominion Freight. It trades about 0.06 of its potential returns per unit of risk. Old Dominion Freight is currently generating about -0.01 per unit of risk. If you would invest  2,857  in P A M on March 27, 2022 and sell it today you would earn a total of  98.00  from holding P A M or generate 3.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

P A M  vs.  Old Dominion Freight

 Performance (%) 
      Timeline 
P A M 
P A Performance
0 of 100
Over the last 90 days P A M has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Structure and Payout Changes

Last Split Factor
2:1
Dividend Date
2012-12-28
Ex Dividend Date
2012-12-13
Last Split Date
2022-03-30

P A Price Channel

Old Dominion Freight 
Old Dominion Performance
0 of 100
Over the last 90 days Old Dominion Freight has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in July 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Old Dominion Price Channel

P A and Old Dominion Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with P A and Old Dominion

The main advantage of trading using opposite P A and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if P A 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 P A M 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.
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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