Correlation Between Old Dominion and Procter Gamble

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

Diversification Opportunities for Old Dominion and Procter Gamble

0.03

Correlation Coefficient

Old Dominion  Procter Gamble

Significant diversification

The 3 months correlation between Old and Procter is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Old Dominion i.e., Old Dominion and Procter Gamble go up and down completely randomly.

Pair Corralation between Old Dominion and Procter Gamble

Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Procter Gamble. In addition to that, Old Dominion is 4.0 times more volatile than Procter Gamble. It trades about -0.23 of its total potential returns per unit of risk. Procter Gamble is currently generating about 0.07 per unit of volatility. If you would invest  15,955  in Procter Gamble on January 29, 2024 and sell it today you would earn a total of  174.00  from holding Procter Gamble or generate 1.09% return on investment over 90 days.

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

Old Dominion Freight  vs.  Procter Gamble

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 latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Procter Gamble

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Old Dominion and Procter Gamble

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

The idea behind Old Dominion Freight and Procter Gamble 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.