Correlation Between Werner Enterprises and Old Dominion

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Can any of the company-specific risk be diversified away by investing in both Werner Enterprises 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 Werner Enterprises and Old Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Werner Enterprises and Old Dominion Freight, you can compare the effects of market volatilities on Werner Enterprises 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 Werner Enterprises with a short position of Old Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Werner Enterprises and Old Dominion.

Diversification Opportunities for Werner Enterprises and Old Dominion

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Werner and Old is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Werner Enterprises 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 Werner Enterprises 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 Werner Enterprises 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 Werner Enterprises i.e., Werner Enterprises and Old Dominion go up and down completely randomly.

Pair Corralation between Werner Enterprises and Old Dominion

Given the investment horizon of 90 days Werner Enterprises is expected to under-perform the Old Dominion. But the stock apears to be less risky and, when comparing its historical volatility, Werner Enterprises is 1.37 times less risky than Old Dominion. The stock trades about -0.01 of its potential returns per unit of risk. The Old Dominion Freight is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  13,441  in Old Dominion Freight on January 28, 2024 and sell it today you would earn a total of  4,801  from holding Old Dominion Freight or generate 35.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Werner Enterprises  vs.  Old Dominion Freight

 Performance 
       Timeline  
Werner Enterprises 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Werner Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Old Dominion Freight 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 unfluctuating 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.

Werner Enterprises and Old Dominion Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Werner Enterprises and Old Dominion

The main advantage of trading using opposite Werner Enterprises and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Werner Enterprises 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 Werner Enterprises 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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