Correlation Between Molina Healthcare and Hilton Worldwide

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Can any of the company-specific risk be diversified away by investing in both Molina Healthcare and Hilton Worldwide 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 Hilton Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Molina Healthcare and Hilton Worldwide Holdings, you can compare the effects of market volatilities on Molina Healthcare and Hilton Worldwide 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 Hilton Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molina Healthcare and Hilton Worldwide.

Diversification Opportunities for Molina Healthcare and Hilton Worldwide

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Molina and Hilton is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Hilton Worldwide Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Worldwide Holdings 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 Hilton Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Worldwide Holdings has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Hilton Worldwide go up and down completely randomly.

Pair Corralation between Molina Healthcare and Hilton Worldwide

Considering the 90-day investment horizon Molina Healthcare is expected to generate 1.12 times less return on investment than Hilton Worldwide. In addition to that, Molina Healthcare is 1.46 times more volatile than Hilton Worldwide Holdings. It trades about 0.19 of its total potential returns per unit of risk. Hilton Worldwide Holdings is currently generating about 0.32 per unit of volatility. If you would invest  20,359  in Hilton Worldwide Holdings on December 29, 2023 and sell it today you would earn a total of  1,075  from holding Hilton Worldwide Holdings or generate 5.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Molina Healthcare  vs.  Hilton Worldwide Holdings

 Performance 
       Timeline  
Molina Healthcare 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Molina Healthcare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Molina Healthcare demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Hilton Worldwide Holdings 

Risk-Adjusted Performance

24 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Hilton Worldwide unveiled solid returns over the last few months and may actually be approaching a breakup point.

Molina Healthcare and Hilton Worldwide Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Molina Healthcare and Hilton Worldwide

The main advantage of trading using opposite Molina Healthcare and Hilton Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molina Healthcare position performs unexpectedly, Hilton Worldwide 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 Hilton Worldwide will offset losses from the drop in Hilton Worldwide's long position.
The idea behind Molina Healthcare and Hilton Worldwide Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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