Correlation Between Bright Health and Molina Healthcare

Can any of the company-specific risk be diversified away by investing in both Bright 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 Bright 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 Bright Health Group and Molina Healthcare, you can compare the effects of market volatilities on Bright 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 Bright Health with a short position of Molina Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Health and Molina Healthcare.

Diversification Opportunities for Bright Health and Molina Healthcare

0.0

Correlation Coefficient

Bright Health  Molina Healthcare

Pay attention - limited upside

The 3 months correlation between Bright and Molina is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bright Health Group and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and Bright 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 Bright Health Group 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 Bright Health i.e., Bright Health and Molina Healthcare go up and down completely randomly.

Pair Corralation between Bright Health and Molina Healthcare

If you would invest  28,938  in Molina Healthcare on December 28, 2024 and sell it today you would earn a total of  3,409  from holding Molina Healthcare or generate 11.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Bright Health Group  vs.  Molina Healthcare

Bright Health Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bright Health Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Bright Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Molina Healthcare

Risk-Adjusted Performance

Modest

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 unfluctuating basic indicators, Molina Healthcare demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bright Health and Molina Healthcare

The main advantage of trading using opposite Bright Health and Molina Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright 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 Bright Health Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.