Correlation Between Molina Healthcare and Stifel Financial

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

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

Diversification Opportunities for Molina Healthcare and Stifel Financial

0.22

Correlation Coefficient

Molina Healthcare  Stifel Financial

Modest diversification

The 3 months correlation between Molina and Stifel is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Stifel Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial 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 Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial Corp has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Stifel Financial go up and down completely randomly.

Pair Corralation between Molina Healthcare and Stifel Financial

Considering the 90-day investment horizon Molina Healthcare is expected to generate 1.83 times more return on investment than Stifel Financial. However, Molina Healthcare is 1.83 times more volatile than Stifel Financial Corp. It trades about 0.02 of its potential returns per unit of risk. Stifel Financial Corp is currently generating about -0.07 per unit of risk. If you would invest  29,821  in Molina Healthcare on October 11, 2024 and sell it today you would earn a total of  78.00  from holding Molina Healthcare or generate 0.26% 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.  Stifel Financial Corp

Molina Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Molina Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Stifel Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stifel Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Stifel Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Molina Healthcare and Stifel Financial

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

The idea behind Molina Healthcare and Stifel Financial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.