Correlation Between Phibro Animal and Molina Healthcare

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

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

Diversification Opportunities for Phibro Animal and Molina Healthcare

-0.01

Correlation Coefficient

Phibro Animal  Molina Healthcare

Good diversification

The 3 months correlation between Phibro and Molina is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and Phibro Animal 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 Phibro Animal 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 Phibro Animal i.e., Phibro Animal and Molina Healthcare go up and down completely randomly.

Pair Corralation between Phibro Animal and Molina Healthcare

Assuming the 90 days horizon Phibro Animal Health is expected to generate 1.32 times more return on investment than Molina Healthcare. However, Phibro Animal is 1.32 times more volatile than Molina Healthcare. It trades about 0.06 of its potential returns per unit of risk. Molina Healthcare is currently generating about 0.02 per unit of risk. If you would invest  1,111  in Phibro Animal Health on October 24, 2024 and sell it today you would earn a total of  889.00  from holding Phibro Animal Health or generate 80.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.76%
Values	Daily Returns

Phibro Animal Health  vs.  Molina Healthcare

Phibro Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phibro Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Phibro Animal and Molina Healthcare

The main advantage of trading using opposite Phibro Animal and Molina Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phibro Animal 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 Phibro Animal 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.