Correlation Between Old Dominion and Viemed Healthcare

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

Diversification Opportunities for Old Dominion and Viemed Healthcare

0.43

Correlation Coefficient

Old Dominion  Viemed Healthcare

Very weak diversification

The 3 months correlation between Old and Viemed is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Viemed Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viemed Healthcare 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 Viemed Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viemed Healthcare has no effect on the direction of Old Dominion i.e., Old Dominion and Viemed Healthcare go up and down completely randomly.

Pair Corralation between Old Dominion and Viemed Healthcare

Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Viemed Healthcare. In addition to that, Old Dominion is 1.08 times more volatile than Viemed Healthcare. It trades about -0.04 of its total potential returns per unit of risk. Viemed Healthcare is currently generating about 0.08 per unit of volatility. If you would invest  731.00  in Viemed Healthcare on September 22, 2024 and sell it today you would earn a total of  67.00  from holding Viemed Healthcare or generate 9.17% return on investment over 90 days.

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

Old Dominion Freight  vs.  Viemed Healthcare

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 quite persistent technical and fundamental indicators, Old Dominion is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Viemed Healthcare

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viemed Healthcare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, Viemed Healthcare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Old Dominion and Viemed Healthcare

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

The idea behind Old Dominion Freight and Viemed Healthcare 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.