Correlation Between Alignment Healthcare and Molina Healthcare

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

Diversification Opportunities for Alignment Healthcare and Molina Healthcare

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alignment and Molina is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alignment Healthcare LLC and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and Alignment 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 Alignment Healthcare LLC 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 Alignment Healthcare i.e., Alignment Healthcare and Molina Healthcare go up and down completely randomly.

Pair Corralation between Alignment Healthcare and Molina Healthcare

Given the investment horizon of 90 days Alignment Healthcare LLC is expected to generate 1.23 times more return on investment than Molina Healthcare. However, Alignment Healthcare is 1.23 times more volatile than Molina Healthcare. It trades about 0.25 of its potential returns per unit of risk. Molina Healthcare is currently generating about 0.08 per unit of risk. If you would invest  1,116  in Alignment Healthcare LLC on December 29, 2024 and sell it today you would earn a total of  714.00  from holding Alignment Healthcare LLC or generate 63.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alignment Healthcare LLC  vs.  Molina Healthcare

 Performance 
       Timeline  
Alignment Healthcare LLC 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Alignment Healthcare LLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, Alignment Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.
Molina Healthcare 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Molina Healthcare are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Molina Healthcare demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Alignment Healthcare and Molina Healthcare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alignment Healthcare and Molina Healthcare

The main advantage of trading using opposite Alignment Healthcare and Molina Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alignment Healthcare 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 Alignment Healthcare LLC 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.
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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