Correlation Between Molina Healthcare and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Molina Healthcare and Lockheed Martin 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 Molina Healthcare and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Molina Healthcare and Lockheed Martin, you can compare the effects of market volatilities on Molina Healthcare and Lockheed Martin 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 Molina Healthcare with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molina Healthcare and Lockheed Martin.
Diversification Opportunities for Molina Healthcare and Lockheed Martin
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Molina and Lockheed is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Molina 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 Molina Healthcare are associated (or correlated) with Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Lockheed Martin go up and down completely randomly.
Pair Corralation between Molina Healthcare and Lockheed Martin
Assuming the 90 days trading horizon Molina Healthcare is expected to generate 1.08 times less return on investment than Lockheed Martin. In addition to that, Molina Healthcare is 1.13 times more volatile than Lockheed Martin. It trades about 0.07 of its total potential returns per unit of risk. Lockheed Martin is currently generating about 0.09 per unit of volatility. If you would invest 46,975 in Lockheed Martin on October 25, 2024 and sell it today you would earn a total of 1,060 from holding Lockheed Martin or generate 2.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Molina Healthcare vs. Lockheed Martin
Performance |
| Timeline |
| Molina Healthcare |
| Lockheed Martin |
Molina Healthcare and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Molina Healthcare and Lockheed Martin
The main advantage of trading using opposite Molina Healthcare and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molina Healthcare position performs unexpectedly, Lockheed Martin 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 Lockheed Martin will offset losses from the drop in Lockheed Martin's long position.| Molina Healthcare vs. Apple Inc | Molina Healthcare vs. Apple Inc | Molina Healthcare vs. Apple Inc | Molina Healthcare vs. Apple Inc |
| Lockheed Martin vs. CARSALESCOM | Lockheed Martin vs. Caseys General Stores | Lockheed Martin vs. AEON STORES | Lockheed Martin vs. 24SEVENOFFICE GROUP AB |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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