Correlation Between Molina Healthcare and Alignment Healthcare

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

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

Diversification Opportunities for Molina Healthcare and Alignment Healthcare

-0.35

Correlation Coefficient

Molina Healthcare  Alignment Healthcare

Very good diversification

The 3 months correlation between Molina and Alignment is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Alignment Healthcare LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alignment Healthcare LLC 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 Alignment Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alignment Healthcare LLC has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Alignment Healthcare go up and down completely randomly.

Pair Corralation between Molina Healthcare and Alignment Healthcare

Considering the 90-day investment horizon Molina Healthcare is expected to under-perform the Alignment Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Molina Healthcare is 1.63 times less risky than Alignment Healthcare. The stock trades about -0.33 of its potential returns per unit of risk. The Alignment Healthcare LLC is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  463.00  in Alignment Healthcare LLC on January 24, 2024 and sell it today you would earn a total of  55.00  from holding Alignment Healthcare LLC or generate 11.88% 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.  Alignment Healthcare LLC

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.

Alignment Healthcare LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alignment Healthcare LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Molina Healthcare and Alignment Healthcare

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

The idea behind Molina Healthcare and Alignment Healthcare LLC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.