Correlation Between HEALTHSTREAM (HL5SG) and Molina Healthcare

Can any of the company-specific risk be diversified away by investing in both HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) and Molina Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HEALTHSTREAM and Molina Healthcare, you can compare the effects of market volatilities on HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) with a short position of Molina Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEALTHSTREAM (HL5SG) and Molina Healthcare.

Diversification Opportunities for HEALTHSTREAM (HL5SG) and Molina Healthcare

-0.33

Correlation Coefficient

HEALTHSTREAM (HL5SG)  Molina Healthcare

Very good diversification

The 3 months correlation between HEALTHSTREAM and Molina is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHSTREAM and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM 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 HEALTHSTREAM (HL5SG) i.e., HEALTHSTREAM (HL5SG) and Molina Healthcare go up and down completely randomly.

Pair Corralation between HEALTHSTREAM (HL5SG) and Molina Healthcare

Assuming the 90 days trading horizon HEALTHSTREAM is expected to under-perform the Molina Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, HEALTHSTREAM is 2.09 times less risky than Molina Healthcare. The stock trades about -0.02 of its potential returns per unit of risk. The Molina Healthcare is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  27,650  in Molina Healthcare on December 30, 2024 and sell it today you would earn a total of  1,940  from holding Molina Healthcare or generate 7.02% return on investment over 90 days.

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

HEALTHSTREAM  vs.  Molina Healthcare

HEALTHSTREAM (HL5SG)

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEALTHSTREAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HEALTHSTREAM (HL5SG) is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Molina Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Molina Healthcare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Molina Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HEALTHSTREAM (HL5SG) and Molina Healthcare

The main advantage of trading using opposite HEALTHSTREAM (HL5SG) and Molina Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.