Correlation Between Molina Healthcare and Bright Health

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

By analyzing existing cross correlation between Molina Healthcare and Bright Health Group, you can compare the effects of market volatilities on Molina Healthcare and Bright 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 Molina Healthcare with a short position of Bright Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molina Healthcare and Bright Health.

Diversification Opportunities for Molina Healthcare and Bright Health

0.32

Correlation Coefficient

Molina Healthcare  Bright Health

Weak diversification

The 3 months correlation between Molina and Bright is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Bright Health Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Health Group and Molina Healthcare 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 Molina Healthcare are associated (or correlated) with Bright Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Health Group has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Bright Health go up and down completely randomly.

Pair Corralation between Molina Healthcare and Bright Health

If you would invest  1,229  in Bright Health Group on September 2, 2024 and sell it today you would earn a total of  0.00  from holding Bright Health Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Molina Healthcare  vs.  Bright Health Group

Molina Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Molina Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Bright Health Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Health Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Bright Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Molina Healthcare and Bright Health

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

The idea behind Molina Healthcare and Bright Health Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.