Correlation Between Old Dominion and Hafnia

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

Diversification Opportunities for Old Dominion and Hafnia

-0.81

Correlation Coefficient

Old Dominion  Hafnia

Pay attention - limited upside

The 3 months correlation between Old and Hafnia is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Old Dominion i.e., Old Dominion and Hafnia go up and down completely randomly.

Pair Corralation between Old Dominion and Hafnia

Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Hafnia. In addition to that, Old Dominion is 2.87 times more volatile than Hafnia Limited. It trades about -0.22 of its total potential returns per unit of risk. Hafnia Limited is currently generating about 0.61 per unit of volatility. If you would invest  744.00  in Hafnia Limited on February 21, 2024 and sell it today you would earn a total of  117.00  from holding Hafnia Limited or generate 15.73% return on investment over 90 days.

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

Old Dominion Freight  vs.  Hafnia Limited

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 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 June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Hafnia Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hafnia Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Hafnia displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Old Dominion and Hafnia

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

The idea behind Old Dominion Freight and Hafnia Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.