Correlation Between ModivCare and InnovAge Holding

Can any of the company-specific risk be diversified away by investing in both ModivCare and InnovAge Holding 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 ModivCare and InnovAge Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ModivCare and InnovAge Holding Corp, you can compare the effects of market volatilities on ModivCare and InnovAge Holding 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 ModivCare with a short position of InnovAge Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of ModivCare and InnovAge Holding.

Diversification Opportunities for ModivCare and InnovAge Holding

0.29

Correlation Coefficient

ModivCare  InnovAge Holding

Modest diversification

The 3 months correlation between ModivCare and InnovAge is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ModivCare and InnovAge Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnovAge Holding Corp and ModivCare 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 ModivCare are associated (or correlated) with InnovAge Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnovAge Holding Corp has no effect on the direction of ModivCare i.e., ModivCare and InnovAge Holding go up and down completely randomly.

Pair Corralation between ModivCare and InnovAge Holding

Given the investment horizon of 90 days ModivCare is expected to generate 3.32 times more return on investment than InnovAge Holding. However, ModivCare is 3.32 times more volatile than InnovAge Holding Corp. It trades about -0.01 of its potential returns per unit of risk. InnovAge Holding Corp is currently generating about -0.13 per unit of risk. If you would invest  2,991  in ModivCare on September 2, 2024 and sell it today you would lose (1,112) from holding ModivCare or give up 37.18% of portfolio value over 90 days.

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

ModivCare  vs.  InnovAge Holding Corp

ModivCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ModivCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

InnovAge Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InnovAge Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with ModivCare and InnovAge Holding

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

The idea behind ModivCare and InnovAge Holding Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.