Correlation Between Oscar Health and Molina Healthcare

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

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

Diversification Opportunities for Oscar Health and Molina Healthcare

0.51

Correlation Coefficient

Oscar Health  Molina Healthcare

Very weak diversification

The 3 months correlation between Oscar and Molina is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Oscar Health and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and Oscar Health 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 Oscar Health 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 Oscar Health i.e., Oscar Health and Molina Healthcare go up and down completely randomly.

Pair Corralation between Oscar Health and Molina Healthcare

Given the investment horizon of 90 days Oscar Health is expected to under-perform the Molina Healthcare. In addition to that, Oscar Health is 1.6 times more volatile than Molina Healthcare. It trades about -0.02 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  29,790  in Molina Healthcare on November 28, 2024 and sell it today you would lose (1,724) from holding Molina Healthcare or give up 5.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Oscar Health  vs.  Molina Healthcare

Oscar Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oscar Health has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Molina Healthcare

Risk-Adjusted Performance

Weak

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

Pair Trading with Oscar Health and Molina Healthcare

The main advantage of trading using opposite Oscar Health and Molina Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oscar Health 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 Oscar Health 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.