Correlation Between Molina Healthcare and Humana

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

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

Diversification Opportunities for Molina Healthcare and Humana

0.55

Correlation Coefficient

Molina Healthcare  Humana

Very weak diversification

The 3 months correlation between Molina and Humana is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc 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 Humana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humana Inc has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Humana go up and down completely randomly.

Pair Corralation between Molina Healthcare and Humana

Considering the 90-day investment horizon Molina Healthcare is expected to generate 1.6 times more return on investment than Humana. However, Molina Healthcare is 1.6 times more volatile than Humana Inc. It trades about -0.01 of its potential returns per unit of risk. Humana Inc is currently generating about -0.27 per unit of risk. If you would invest  31,188  in Molina Healthcare on November 28, 2024 and sell it today you would lose (591.00) from holding Molina Healthcare or give up 1.89% of portfolio value over 90 days.

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

Molina Healthcare  vs.  Humana Inc

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. Despite fairly strong basic indicators, Molina Healthcare is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Humana Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Humana Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Molina Healthcare and Humana

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

The idea behind Molina Healthcare and Humana Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.