Correlation Between Old Dominion and Sonida Senior

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

Diversification Opportunities for Old Dominion and Sonida Senior

0.73

Correlation Coefficient

Old Dominion  Sonida Senior

Poor diversification

The 3 months correlation between Old and Sonida is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living 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 Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of Old Dominion i.e., Old Dominion and Sonida Senior go up and down completely randomly.

Pair Corralation between Old Dominion and Sonida Senior

Given the investment horizon of 90 days Old Dominion is expected to generate 4.89 times less return on investment than Sonida Senior. But when comparing it to its historical volatility, Old Dominion Freight is 1.04 times less risky than Sonida Senior. It trades about 0.02 of its potential returns per unit of risk. Sonida Senior Living is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,288  in Sonida Senior Living on December 2, 2024 and sell it today you would earn a total of  142.00  from holding Sonida Senior Living or generate 6.21% return on investment over 90 days.

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

Old Dominion Freight  vs.  Sonida Senior Living

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sonida Senior Living

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonida Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Sonida Senior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Old Dominion and Sonida Senior

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

The idea behind Old Dominion Freight and Sonida Senior Living 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.