Correlation Between Molina Healthcare and CVS Health

Can any of the company-specific risk be diversified away by investing in both Molina Healthcare and CVS 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 CVS 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 CVS Health Corp, you can compare the effects of market volatilities on Molina Healthcare and CVS 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molina Healthcare and CVS Health.

Diversification Opportunities for Molina Healthcare and CVS Health

0.31

Correlation Coefficient

Molina Healthcare  CVS Health

Weak diversification

The 3 months correlation between Molina and CVS is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and CVS Health go up and down completely randomly.

Pair Corralation between Molina Healthcare and CVS Health

Considering the 90-day investment horizon Molina Healthcare is expected to generate 3.65 times less return on investment than CVS Health. In addition to that, Molina Healthcare is 1.1 times more volatile than CVS Health Corp. It trades about 0.07 of its total potential returns per unit of risk. CVS Health Corp is currently generating about 0.28 per unit of volatility. If you would invest  4,436  in CVS Health Corp on December 26, 2024 and sell it today you would earn a total of  2,284  from holding CVS Health Corp or generate 51.49% 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.  CVS Health Corp

Molina Healthcare

Risk-Adjusted Performance

Insignificant

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

CVS Health Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, CVS Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Molina Healthcare and CVS Health

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

The idea behind Molina Healthcare and CVS Health Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.