Correlation Between Molina Healthcare and Masimo

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

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

Diversification Opportunities for Molina Healthcare and Masimo

-0.28

Correlation Coefficient

Molina Healthcare  Masimo

Very good diversification

The 3 months correlation between Molina and Masimo is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Masimo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masimo 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 Masimo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masimo has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Masimo go up and down completely randomly.

Pair Corralation between Molina Healthcare and Masimo

Considering the 90-day investment horizon Molina Healthcare is expected to generate 1.07 times more return on investment than Masimo. However, Molina Healthcare is 1.07 times more volatile than Masimo. It trades about 0.08 of its potential returns per unit of risk. Masimo is currently generating about -0.01 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.  Masimo

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.

Masimo

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Molina Healthcare and Masimo

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

The idea behind Molina Healthcare and Masimo 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.