Correlation Between Walmart and Molina Healthcare

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

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

Diversification Opportunities for Walmart and Molina Healthcare

-0.45

Correlation Coefficient

Walmart  Molina Healthcare

Very good diversification

The 3 months correlation between Walmart and Molina is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and Walmart 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 Walmart 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 Walmart i.e., Walmart and Molina Healthcare go up and down completely randomly.

Pair Corralation between Walmart and Molina Healthcare

Assuming the 90 days horizon Walmart is expected to generate 0.51 times more return on investment than Molina Healthcare. However, Walmart is 1.98 times less risky than Molina Healthcare. It trades about 0.14 of its potential returns per unit of risk. Molina Healthcare is currently generating about 0.02 per unit of risk. If you would invest  4,273  in Walmart on October 23, 2024 and sell it today you would earn a total of  4,605  from holding Walmart or generate 107.77% return on investment over 90 days.

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

Walmart  vs.  Molina Healthcare

Walmart

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Molina Healthcare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Molina Healthcare are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Molina Healthcare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walmart and Molina Healthcare

The main advantage of trading using opposite Walmart and Molina Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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 Walmart 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.