Correlation Between Option Care and ModivCare

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

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

Diversification Opportunities for Option Care and ModivCare

-0.21

Correlation Coefficient

Option Care  ModivCare

Very good diversification

The 3 months correlation between Option and ModivCare is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Option Care Health and ModivCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ModivCare and Option Care 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 Option Care Health are associated (or correlated) with ModivCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ModivCare has no effect on the direction of Option Care i.e., Option Care and ModivCare go up and down completely randomly.

Pair Corralation between Option Care and ModivCare

Given the investment horizon of 90 days Option Care Health is expected to generate 0.4 times more return on investment than ModivCare. However, Option Care Health is 2.52 times less risky than ModivCare. It trades about 0.01 of its potential returns per unit of risk. ModivCare is currently generating about -0.06 per unit of risk. If you would invest  2,918  in Option Care Health on October 23, 2024 and sell it today you would lose (2.00) from holding Option Care Health or give up 0.07% of portfolio value over 90 days.

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

Option Care Health  vs.  ModivCare

Option Care Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

ModivCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ModivCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Option Care and ModivCare

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

The idea behind Option Care Health and ModivCare 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .