Correlation Between Old Dominion and SkyWest

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

Diversification Opportunities for Old Dominion and SkyWest

-0.16

Correlation Coefficient

Old Dominion  SkyWest

Good diversification

The 3 months correlation between Old and SkyWest is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest 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 SkyWest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SkyWest has no effect on the direction of Old Dominion i.e., Old Dominion and SkyWest go up and down completely randomly.

Pair Corralation between Old Dominion and SkyWest

Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the SkyWest. In addition to that, Old Dominion is 1.54 times more volatile than SkyWest. It trades about -0.23 of its total potential returns per unit of risk. SkyWest is currently generating about 0.18 per unit of volatility. If you would invest  6,906  in SkyWest on February 3, 2024 and sell it today you would earn a total of  592.00  from holding SkyWest or generate 8.57% return on investment over 90 days.

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

Old Dominion Freight  vs.  SkyWest

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 inconsistent 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.

SkyWest

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SkyWest showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Old Dominion and SkyWest

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

The idea behind Old Dominion Freight and SkyWest 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.