Correlation Between Heartland Express and Old Dominion

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

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

Diversification Opportunities for Heartland Express and Old Dominion

0.82

Correlation Coefficient

Heartland Express  Old Dominion

Very poor diversification

The 3 months correlation between Heartland and Old is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Express 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 Heartland Express 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 Heartland Express 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 Heartland Express i.e., Heartland Express and Old Dominion go up and down completely randomly.

Pair Corralation between Heartland Express and Old Dominion

Assuming the 90 days horizon Heartland Express is expected to under-perform the Old Dominion. But the stock apears to be less risky and, when comparing its historical volatility, Heartland Express is 1.33 times less risky than Old Dominion. The stock trades about -0.03 of its potential returns per unit of risk. The Old Dominion Freight is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  13,354  in Old Dominion Freight on September 26, 2024 and sell it today you would earn a total of  4,136  from holding Old Dominion Freight or generate 30.97% return on investment over 90 days.

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

Heartland Express  vs.  Old Dominion Freight

Heartland Express

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Express are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Heartland Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 nearly stable basic indicators, Old Dominion is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Heartland Express and Old Dominion

The main advantage of trading using opposite Heartland Express and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heartland Express 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 Heartland Express 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.