Correlation Between Acadia Healthcare and Molina Healthcare
Can any of the company-specific risk be diversified away by investing in both Acadia Healthcare 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 Acadia Healthcare and Molina Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acadia Healthcare and Molina Healthcare, you can compare the effects of market volatilities on Acadia Healthcare 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 Acadia Healthcare with a short position of Molina Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and Molina Healthcare.
Diversification Opportunities for Acadia Healthcare and Molina Healthcare
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Acadia and Molina is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and Acadia Healthcare 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 Acadia Healthcare 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 Acadia Healthcare i.e., Acadia Healthcare and Molina Healthcare go up and down completely randomly.
Pair Corralation between Acadia Healthcare and Molina Healthcare
Assuming the 90 days horizon Acadia Healthcare is expected to generate 2.16 times more return on investment than Molina Healthcare. However, Acadia Healthcare is 2.16 times more volatile than Molina Healthcare. It trades about 0.36 of its potential returns per unit of risk. Molina Healthcare is currently generating about 0.02 per unit of risk. If you would invest 3,740 in Acadia Healthcare on October 11, 2024 and sell it today you would earn a total of 700.00 from holding Acadia Healthcare or generate 18.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Acadia Healthcare vs. Molina Healthcare
Performance |
| Timeline |
| Acadia Healthcare |
| Molina Healthcare |
Acadia Healthcare and Molina Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Acadia Healthcare and Molina Healthcare
The main advantage of trading using opposite Acadia Healthcare and Molina Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acadia Healthcare 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.| Acadia Healthcare vs. BC IRON | Acadia Healthcare vs. Monument Mining Limited | Acadia Healthcare vs. Dentsply Sirona | Acadia Healthcare vs. Nippon Steel |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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