Correlation Between PURETECH HEALTH and Molina Healthcare

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

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

Diversification Opportunities for PURETECH HEALTH and Molina Healthcare

-0.07

Correlation Coefficient

PURETECH HEALTH  Molina Healthcare

Good diversification

The 3 months correlation between PURETECH and Molina is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding PURETECH HEALTH PLC and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and PURETECH HEALTH 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 PURETECH HEALTH PLC are associated (or correlated) with Molina Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molina Healthcare has no effect on the direction of PURETECH HEALTH i.e., PURETECH HEALTH and Molina Healthcare go up and down completely randomly.

Pair Corralation between PURETECH HEALTH and Molina Healthcare

Assuming the 90 days horizon PURETECH HEALTH PLC is expected to under-perform the Molina Healthcare. In addition to that, PURETECH HEALTH is 1.59 times more volatile than Molina Healthcare. It trades about -0.04 of its total potential returns per unit of risk. Molina Healthcare is currently generating about 0.02 per unit of volatility. If you would invest  28,950  in Molina Healthcare on October 26, 2024 and sell it today you would earn a total of  200.00  from holding Molina Healthcare or generate 0.69% return on investment over 90 days.

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

PURETECH HEALTH PLC  vs.  Molina Healthcare

PURETECH HEALTH PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PURETECH HEALTH PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Molina Healthcare

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Molina Healthcare are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Molina Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PURETECH HEALTH and Molina Healthcare

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

The idea behind PURETECH HEALTH PLC and Molina Healthcare 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.