Correlation Between Molina Healthcare and Pulmonx Corp

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

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

Diversification Opportunities for Molina Healthcare and Pulmonx Corp

-0.02

Correlation Coefficient

Molina Healthcare  Pulmonx Corp

Good diversification

The 3 months correlation between Molina and Pulmonx is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Pulmonx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulmonx 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 Pulmonx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulmonx Corp has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Pulmonx Corp go up and down completely randomly.

Pair Corralation between Molina Healthcare and Pulmonx Corp

Considering the 90-day investment horizon Molina Healthcare is expected to generate 0.52 times more return on investment than Pulmonx Corp. However, Molina Healthcare is 1.92 times less risky than Pulmonx Corp. It trades about 0.08 of its potential returns per unit of risk. Pulmonx Corp is currently generating about 0.03 per unit of risk. If you would invest  28,938  in Molina Healthcare on December 29, 2024 and sell it today you would earn a total of  3,409  from holding Molina Healthcare or generate 11.78% 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.  Pulmonx Corp

Molina Healthcare

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Molina Healthcare are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Molina Healthcare demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pulmonx Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pulmonx Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Pulmonx Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Molina Healthcare and Pulmonx Corp

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

The idea behind Molina Healthcare and Pulmonx 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.