Correlation Between Molina Healthcare and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Molina Healthcare and Methode Electronics 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 Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Molina Healthcare and Methode Electronics, you can compare the effects of market volatilities on Molina Healthcare and Methode Electronics 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 Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molina Healthcare and Methode Electronics.
Diversification Opportunities for Molina Healthcare and Methode Electronics
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Molina and Methode is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics 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 Methode Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methode Electronics has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and Methode Electronics go up and down completely randomly.
Pair Corralation between Molina Healthcare and Methode Electronics
Assuming the 90 days trading horizon Molina Healthcare is expected to generate 0.57 times more return on investment than Methode Electronics. However, Molina Healthcare is 1.76 times less risky than Methode Electronics. It trades about 0.02 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.04 per unit of risk. If you would invest 26,800 in Molina Healthcare on October 13, 2024 and sell it today you would earn a total of 1,820 from holding Molina Healthcare or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Molina Healthcare vs. Methode Electronics
Performance |
| Timeline |
| Molina Healthcare |
| Methode Electronics |
Molina Healthcare and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Molina Healthcare and Methode Electronics
The main advantage of trading using opposite Molina Healthcare and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molina Healthcare position performs unexpectedly, Methode Electronics 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 Methode Electronics will offset losses from the drop in Methode Electronics' long position.| Molina Healthcare vs. Geely Automobile Holdings | Molina Healthcare vs. New Residential Investment | Molina Healthcare vs. T MOBILE INCDL 00001 | Molina Healthcare vs. Charter Communications |
| Methode Electronics vs. Molina Healthcare | Methode Electronics vs. US Physical Therapy | Methode Electronics vs. X FAB Silicon Foundries | Methode Electronics vs. TRI CHEMICAL LABORATINC |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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