Correlation Between ModivCare and Option Care

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Can any of the company-specific risk be diversified away by investing in both ModivCare and Option Care 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 ModivCare and Option Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ModivCare and Option Care Health, you can compare the effects of market volatilities on ModivCare and Option Care 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 ModivCare with a short position of Option Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of ModivCare and Option Care.

Diversification Opportunities for ModivCare and Option Care

-0.21
  Correlation Coefficient

Very good diversification

The 3 months correlation between ModivCare and Option is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding ModivCare and Option Care Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Option Care Health and ModivCare 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 ModivCare are associated (or correlated) with Option Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Option Care Health has no effect on the direction of ModivCare i.e., ModivCare and Option Care go up and down completely randomly.

Pair Corralation between ModivCare and Option Care

Given the investment horizon of 90 days ModivCare is expected to under-perform the Option Care. In addition to that, ModivCare is 2.52 times more volatile than Option Care Health. It trades about -0.06 of its total potential returns per unit of risk. Option Care Health is currently generating about 0.01 per unit of volatility. If you would invest  2,918  in Option Care Health on October 23, 2024 and sell it today you would lose (2.00) from holding Option Care Health or give up 0.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ModivCare  vs.  Option Care Health

 Performance 
       Timeline  
ModivCare 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
Option Care Health 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Option Care Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Option Care is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

ModivCare and Option Care Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ModivCare and Option Care

The main advantage of trading using opposite ModivCare and Option Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ModivCare position performs unexpectedly, Option Care 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 Option Care will offset losses from the drop in Option Care's long position.
The idea behind ModivCare and Option Care Health 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.
Check out your portfolio center.
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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