Correlation Between Molina Healthcare and Kurita Water

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

By analyzing existing cross correlation between Molina Healthcare and Kurita Water Industries, you can compare the effects of market volatilities on Molina Healthcare and Kurita Water 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 Kurita Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molina Healthcare and Kurita Water.

Diversification Opportunities for Molina Healthcare and Kurita Water

-0.14

Correlation Coefficient

Molina Healthcare  Kurita Water

Good diversification

The 3 months correlation between Molina and Kurita is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Kurita Water Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kurita Water Industries 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 Kurita Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kurita Water Industries has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Kurita Water go up and down completely randomly.

Pair Corralation between Molina Healthcare and Kurita Water

Assuming the 90 days trading horizon Molina Healthcare is expected to generate 1.17 times more return on investment than Kurita Water. However, Molina Healthcare is 1.17 times more volatile than Kurita Water Industries. It trades about 0.02 of its potential returns per unit of risk. Kurita Water Industries is currently generating about -0.04 per unit of risk. If you would invest  28,050  in Molina Healthcare on December 21, 2024 and sell it today you would earn a total of  500.00  from holding Molina Healthcare or generate 1.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Molina Healthcare  vs.  Kurita Water Industries

Molina Healthcare

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Molina Healthcare are ranked lower than 1 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Kurita Water Industries

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Molina Healthcare and Kurita Water

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

The idea behind Molina Healthcare and Kurita Water Industries 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.