Correlation Between Molina Healthcare and Bausch Health

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

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

Diversification Opportunities for Molina Healthcare and Bausch Health

0.28

Correlation Coefficient

Molina Healthcare  Bausch Health

Modest diversification

The 3 months correlation between Molina and Bausch is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Bausch Health Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Health Companies and Molina 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 Molina Healthcare are associated (or correlated) with Bausch Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Health Companies has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Bausch Health go up and down completely randomly.

Pair Corralation between Molina Healthcare and Bausch Health

Assuming the 90 days trading horizon Molina Healthcare is expected to generate 0.93 times more return on investment than Bausch Health. However, Molina Healthcare is 1.08 times less risky than Bausch Health. It trades about 0.03 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.05 per unit of risk. If you would invest  28,050  in Molina Healthcare on December 22, 2024 and sell it today you would earn a total of  600.00  from holding Molina Healthcare or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Molina Healthcare  vs.  Bausch Health Companies

Molina Healthcare

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Molina Healthcare are ranked lower than 2 (%) 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.

Bausch Health Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Pair Trading with Molina Healthcare and Bausch Health

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

The idea behind Molina Healthcare and Bausch Health Companies 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 CEOs Directory module to screen CEOs from public companies around the world.