Correlation Between Molina Healthcare and UPM Kymmene

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

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

Diversification Opportunities for Molina Healthcare and UPM Kymmene

-0.2

Correlation Coefficient

Molina Healthcare  UPM Kymmene

Good diversification

The 3 months correlation between Molina and UPM is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and UPM Kymmene Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPM Kymmene Oyj 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 UPM Kymmene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPM Kymmene Oyj has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and UPM Kymmene go up and down completely randomly.

Pair Corralation between Molina Healthcare and UPM Kymmene

Assuming the 90 days trading horizon Molina Healthcare is expected to generate 1.89 times less return on investment than UPM Kymmene. In addition to that, Molina Healthcare is 1.96 times more volatile than UPM Kymmene Oyj. It trades about 0.03 of its total potential returns per unit of risk. UPM Kymmene Oyj is currently generating about 0.1 per unit of volatility. If you would invest  2,543  in UPM Kymmene Oyj on December 20, 2024 and sell it today you would earn a total of  216.00  from holding UPM Kymmene Oyj or generate 8.49% return on investment over 90 days.

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

Molina Healthcare  vs.  UPM Kymmene Oyj

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

UPM Kymmene Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UPM Kymmene Oyj are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, UPM Kymmene may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Molina Healthcare and UPM Kymmene

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

The idea behind Molina Healthcare and UPM Kymmene Oyj 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.