Correlation Between Molina Healthcare and CVS Corp

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Can any of the company-specific risk be diversified away by investing in both Molina Healthcare and CVS Corp 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 CVS Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Molina Healthcare and CVS Corp, you can compare the effects of market volatilities on Molina Healthcare and CVS Corp 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 CVS Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molina Healthcare and CVS Corp.

Diversification Opportunities for Molina Healthcare and CVS Corp

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Molina and CVS Corp is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Molina Healthcare and CVS Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Corp 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 CVS Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Corp has no effect on the direction of Molina Healthcare i.e., Molina Healthcare and CVS Corp go up and down completely randomly.

Pair Corralation between Molina Healthcare and CVS Corp

Considering the 90-day investment horizon Molina Healthcare is expected to generate 1.4 times more return on investment than CVS Corp. However, Molina Healthcare is 1.4 times more volatile than CVS Corp. It trades about -0.04 of its potential returns per unit of risk. CVS Corp is currently generating about -0.1 per unit of risk. If you would invest  28,919  in Molina Healthcare on April 3, 2022 and sell it today you would lose (629.00)  from holding Molina Healthcare or give up 2.18% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Molina Healthcare  vs.  CVS Corp

 Performance (%) 
      Timeline 
Molina Healthcare 
Molina Performance
0 of 100
Over the last 90 days Molina Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Structure and Payout Changes

Last Split Factor
3:2
Last Split Date
2011-05-23

Molina Price Channel

CVS Corp 
CVS Corp Performance
0 of 100
Over the last 90 days CVS Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, CVS Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0242
Payout Ratio
0.24
Last Split Factor
2:1
Forward Annual Dividend Rate
2.2
Dividend Date
2022-05-02
Ex Dividend Date
2022-04-21
Last Split Date
2005-06-07

CVS Corp Price Channel

Molina Healthcare and CVS Corp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Molina Healthcare and CVS Corp

The main advantage of trading using opposite Molina Healthcare and CVS Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molina Healthcare position performs unexpectedly, CVS Corp 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 CVS Corp will offset losses from the drop in CVS Corp's long position.
The idea behind Molina Healthcare and CVS Corp 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.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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