Correlation Between Molina Healthcare and Centene Corp
Can any of the company-specific risk be diversified away by investing in both Molina Healthcare and Centene Corp 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 Centene Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Molina Healthcare and Centene Corp, you can compare the effects of market volatilities on Molina Healthcare and Centene Corp 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 Centene Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molina Healthcare and Centene Corp.
Diversification Opportunities for Molina Healthcare and Centene Corp
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Molina and Centene is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Centene Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centene 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 Centene Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centene Corp has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Centene Corp go up and down completely randomly.
Pair Corralation between Molina Healthcare and Centene Corp
Considering the 90-day investment horizon Molina Healthcare is expected to generate 1.06 times more return on investment than Centene Corp. However, Molina Healthcare is 1.06 times more volatile than Centene Corp. It trades about 0.05 of its potential returns per unit of risk. Centene Corp is currently generating about 0.04 per unit of risk. If you would invest 35,361 in Molina Healthcare on January 26, 2024 and sell it today you would earn a total of 1,380 from holding Molina Healthcare or generate 3.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Molina Healthcare vs. Centene Corp
Performance |
| Timeline |
| Molina Healthcare |
| Centene Corp |
Molina Healthcare and Centene Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Molina Healthcare and Centene Corp
The main advantage of trading using opposite Molina Healthcare and Centene Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molina Healthcare position performs unexpectedly, Centene Corp 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 Centene Corp will offset losses from the drop in Centene Corp's long position.The idea behind Molina Healthcare and Centene 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.Check out your portfolio center.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |