Correlation Between NI Holdings and Molina Healthcare

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

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

Diversification Opportunities for NI Holdings and Molina Healthcare

-0.24

Correlation Coefficient

NI Holdings  Molina Healthcare

Very good diversification

The 3 months correlation between NODK and Molina is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and NI Holdings 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 NI Holdings are associated (or correlated) with Molina Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molina Healthcare has no effect on the direction of NI Holdings i.e., NI Holdings and Molina Healthcare go up and down completely randomly.

Pair Corralation between NI Holdings and Molina Healthcare

Given the investment horizon of 90 days NI Holdings is expected to under-perform the Molina Healthcare. In addition to that, NI Holdings is 1.1 times more volatile than Molina Healthcare. It trades about -0.41 of its total potential returns per unit of risk. Molina Healthcare is currently generating about 0.02 per unit of volatility. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NI Holdings  vs.  Molina Healthcare

NI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with NI Holdings and Molina Healthcare

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

The idea behind NI Holdings and Molina Healthcare 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 Transaction History module to view history of all your transactions and understand their impact on performance.