Correlation Between OtelloASA and Old Dominion

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

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

Diversification Opportunities for OtelloASA and Old Dominion

-0.43

Correlation Coefficient

OtelloASA  Old Dominion

Very good diversification

The 3 months correlation between OtelloASA and Old is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Otello ASA 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 OtelloASA 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 Otello ASA 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 OtelloASA i.e., OtelloASA and Old Dominion go up and down completely randomly.

Pair Corralation between OtelloASA and Old Dominion

Assuming the 90 days horizon Otello ASA is expected to under-perform the Old Dominion. But the stock apears to be less risky and, when comparing its historical volatility, Otello ASA is 1.38 times less risky than Old Dominion. The stock trades about -0.06 of its potential returns per unit of risk. The Old Dominion Freight is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  17,049  in Old Dominion Freight on September 12, 2024 and sell it today you would earn a total of  2,301  from holding Old Dominion Freight or generate 13.5% return on investment over 90 days.

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

Otello ASA  vs.  Old Dominion Freight

Otello ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otello ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Old Dominion Freight

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Old Dominion Freight are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Old Dominion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OtelloASA and Old Dominion

The main advantage of trading using opposite OtelloASA and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OtelloASA 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 Otello ASA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.