Correlation Between Old Dominion and Analog Devices

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

Diversification Opportunities for Old Dominion and Analog Devices

0.64

Correlation Coefficient

Old Dominion  Analog Devices

Poor diversification

The 3 months correlation between Old and Analog is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Old Dominion i.e., Old Dominion and Analog Devices go up and down completely randomly.

Pair Corralation between Old Dominion and Analog Devices

Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Analog Devices. But the stock apears to be less risky and, when comparing its historical volatility, Old Dominion Freight is 1.24 times less risky than Analog Devices. The stock trades about -0.1 of its potential returns per unit of risk. The Analog Devices is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  20,900  in Analog Devices on January 29, 2025 and sell it today you would lose (1,528) from holding Analog Devices or give up 7.31% of portfolio value over 90 days.

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

Old Dominion Freight  vs.  Analog Devices

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.

Analog Devices

Risk-Adjusted Performance

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Old Dominion and Analog Devices

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

The idea behind Old Dominion Freight and Analog Devices 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.