Correlation Between Molina Healthcare and Laboratory

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

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

Diversification Opportunities for Molina Healthcare and Laboratory

-0.33

Correlation Coefficient

Molina Healthcare  Laboratory

Very good diversification

The 3 months correlation between Molina and Laboratory is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Laboratory of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratory 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 Laboratory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laboratory has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Laboratory go up and down completely randomly.

Pair Corralation between Molina Healthcare and Laboratory

Considering the 90-day investment horizon Molina Healthcare is expected to generate 11.98 times less return on investment than Laboratory. In addition to that, Molina Healthcare is 1.61 times more volatile than Laboratory of. It trades about 0.0 of its total potential returns per unit of risk. Laboratory of is currently generating about 0.04 per unit of volatility. If you would invest  19,190  in Laboratory of on September 5, 2024 and sell it today you would earn a total of  4,867  from holding Laboratory of or generate 25.36% return on investment over 90 days.

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

Molina Healthcare  vs.  Laboratory of

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 fairly strong basic indicators, Molina Healthcare is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Laboratory

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Laboratory of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Laboratory may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Molina Healthcare and Laboratory

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

The idea behind Molina Healthcare and Laboratory of 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.