Correlation Between Molina Healthcare and Edwards Lifesciences

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

By analyzing existing cross correlation between Molina Healthcare and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Molina Healthcare and Edwards Lifesciences 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 Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molina Healthcare and Edwards Lifesciences.

Diversification Opportunities for Molina Healthcare and Edwards Lifesciences

-0.43

Correlation Coefficient

Molina Healthcare  Edwards Lifesciences

Very good diversification

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

Pair Corralation between Molina Healthcare and Edwards Lifesciences

Considering the 90-day investment horizon Molina Healthcare is expected to under-perform the Edwards Lifesciences. In addition to that, Molina Healthcare is 1.67 times more volatile than Edwards Lifesciences Corp. It trades about -0.17 of its total potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about 0.14 per unit of volatility. If you would invest  6,937  in Edwards Lifesciences Corp on August 30, 2024 and sell it today you would earn a total of  270.00  from holding Edwards Lifesciences Corp or generate 3.89% return on investment over 90 days.

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

Molina Healthcare  vs.  Edwards Lifesciences Corp

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 December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Edwards Lifesciences Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Edwards Lifesciences is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Molina Healthcare and Edwards Lifesciences

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

The idea behind Molina Healthcare and Edwards Lifesciences 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.