Correlation Between Boston Beer and Molina Healthcare
Can any of the company-specific risk be diversified away by investing in both Boston Beer 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 Boston Beer and Molina Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Molina Healthcare, you can compare the effects of market volatilities on Boston Beer 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 Boston Beer with a short position of Molina Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Molina Healthcare.
Diversification Opportunities for Boston Beer and Molina Healthcare
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Boston and Molina is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare and Boston Beer 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 Boston Beer 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 Boston Beer i.e., Boston Beer and Molina Healthcare go up and down completely randomly.
Pair Corralation between Boston Beer and Molina Healthcare
Considering the 90-day investment horizon Boston Beer is expected to under-perform the Molina Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 1.03 times less risky than Molina Healthcare. The stock trades about -0.05 of its potential returns per unit of risk. The Molina Healthcare is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 36,210 in Molina Healthcare on November 3, 2024 and sell it today you would lose (5,169) from holding Molina Healthcare or give up 14.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Molina Healthcare
Performance |
| Timeline |
| Boston Beer |
| Molina Healthcare |
Boston Beer and Molina Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Molina Healthcare
The main advantage of trading using opposite Boston Beer and Molina Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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.| Boston Beer vs. Anheuser Busch Inbev | Boston Beer vs. Molson Coors Beverage | Boston Beer vs. Heineken NV | Boston Beer vs. Ambev SA ADR |
| Molina Healthcare vs. Cigna Corp | Molina Healthcare vs. Humana Inc | Molina Healthcare vs. Elevance Health | Molina Healthcare vs. Alignment Healthcare LLC |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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