Correlation Between GM and Molina Healthcare
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Molina Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Molina Healthcare, you can compare the effects of market volatilities on GM 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 GM with a short position of Molina Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Molina Healthcare.
Diversification Opportunities for GM and Molina Healthcare
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Molina is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and GM 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 General Motors 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 GM i.e., GM and Molina Healthcare go up and down completely randomly.
Pair Corralation between GM and Molina Healthcare
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Molina Healthcare. In addition to that, GM is 1.68 times more volatile than Molina Healthcare. It trades about -0.06 of its total potential returns per unit of risk. Molina Healthcare is currently generating about 0.2 per unit of volatility. If you would invest 27,560 in Molina Healthcare on November 4, 2024 and sell it today you would earn a total of 2,100 from holding Molina Healthcare or generate 7.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
General Motors vs. Molina Healthcare
Performance |
| Timeline |
| General Motors |
| Molina Healthcare |
GM and Molina Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Molina Healthcare
The main advantage of trading using opposite GM and Molina Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Molina Healthcare vs. Direct Line Insurance | Molina Healthcare vs. COREBRIDGE FINANCIAL INC | Molina Healthcare vs. Penta Ocean Construction Co | Molina Healthcare vs. Hitachi Construction Machinery |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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