Correlation Between Old Dominion and SunLink Health

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

Diversification Opportunities for Old Dominion and SunLink Health

-0.51

Correlation Coefficient

Old Dominion  SunLink Health

Excellent diversification

The 3 months correlation between Old and SunLink is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and SunLink Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunLink Health Systems 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 SunLink Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunLink Health Systems has no effect on the direction of Old Dominion i.e., Old Dominion and SunLink Health go up and down completely randomly.

Pair Corralation between Old Dominion and SunLink Health

Given the investment horizon of 90 days Old Dominion is expected to generate 16.77 times less return on investment than SunLink Health. But when comparing it to its historical volatility, Old Dominion Freight is 2.57 times less risky than SunLink Health. It trades about 0.02 of its potential returns per unit of risk. SunLink Health Systems is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  91.00  in SunLink Health Systems on December 2, 2024 and sell it today you would earn a total of  18.00  from holding SunLink Health Systems or generate 19.78% return on investment over 90 days.

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

Old Dominion Freight  vs.  SunLink Health Systems

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.

SunLink Health Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SunLink Health Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, SunLink Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Old Dominion and SunLink Health

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

The idea behind Old Dominion Freight and SunLink Health Systems 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.