Correlation Between Medical Facilities and ModivCare

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

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

Diversification Opportunities for Medical Facilities and ModivCare

0.44

Correlation Coefficient

Medical Facilities  ModivCare

Very weak diversification

The 3 months correlation between Medical and ModivCare is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and ModivCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ModivCare and Medical Facilities 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 Medical Facilities are associated (or correlated) with ModivCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ModivCare has no effect on the direction of Medical Facilities i.e., Medical Facilities and ModivCare go up and down completely randomly.

Pair Corralation between Medical Facilities and ModivCare

Assuming the 90 days horizon Medical Facilities is expected to generate 0.3 times more return on investment than ModivCare. However, Medical Facilities is 3.31 times less risky than ModivCare. It trades about -0.08 of its potential returns per unit of risk. ModivCare is currently generating about -0.23 per unit of risk. If you would invest  1,128  in Medical Facilities on September 21, 2024 and sell it today you would lose (37.00) from holding Medical Facilities or give up 3.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Medical Facilities  vs.  ModivCare

Medical Facilities

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Medical Facilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ModivCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ModivCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, ModivCare is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Medical Facilities and ModivCare

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

The idea behind Medical Facilities and ModivCare 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.