Correlation Between Covenant Logistics and Old Dominion

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

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

Diversification Opportunities for Covenant Logistics and Old Dominion

0.28

Correlation Coefficient

Covenant Logistics  Old Dominion

Modest diversification

The 3 months correlation between Covenant and Old is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Covenant Logistics Group, 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 Covenant Logistics 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 Covenant Logistics Group, 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 Covenant Logistics i.e., Covenant Logistics and Old Dominion go up and down completely randomly.

Pair Corralation between Covenant Logistics and Old Dominion

Given the investment horizon of 90 days Covenant Logistics Group, is expected to under-perform the Old Dominion. But the stock apears to be less risky and, when comparing its historical volatility, Covenant Logistics Group, is 1.07 times less risky than Old Dominion. The stock trades about -0.21 of its potential returns per unit of risk. The Old Dominion Freight is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  18,238  in Old Dominion Freight on January 5, 2025 and sell it today you would lose (3,032) from holding Old Dominion Freight or give up 16.62% of portfolio value over 90 days.

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

Covenant Logistics Group,  vs.  Old Dominion Freight

Covenant Logistics Group,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Covenant Logistics Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Old Dominion Freight

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Covenant Logistics and Old Dominion

The main advantage of trading using opposite Covenant Logistics and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Covenant Logistics 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 Covenant Logistics Group, 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.