Correlation Between Humana and Axon Enterprise

Can any of the company-specific risk be diversified away by investing in both Humana and Axon Enterprise 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 Humana and Axon Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Humana Inc and Axon Enterprise, you can compare the effects of market volatilities on Humana and Axon Enterprise 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 Humana with a short position of Axon Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and Axon Enterprise.

Diversification Opportunities for Humana and Axon Enterprise

0.15

Correlation Coefficient

Humana  Axon Enterprise

Average diversification

The 3 months correlation between Humana and Axon is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Axon Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axon Enterprise and Humana 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 Humana Inc are associated (or correlated) with Axon Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axon Enterprise has no effect on the direction of Humana i.e., Humana and Axon Enterprise go up and down completely randomly.

Pair Corralation between Humana and Axon Enterprise

Assuming the 90 days trading horizon Humana Inc is expected to generate 0.75 times more return on investment than Axon Enterprise. However, Humana Inc is 1.33 times less risky than Axon Enterprise. It trades about -0.04 of its potential returns per unit of risk. Axon Enterprise is currently generating about -0.05 per unit of risk. If you would invest  29,245  in Humana Inc on December 1, 2024 and sell it today you would lose (2,917) from holding Humana Inc or give up 9.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Humana Inc  vs.  Axon Enterprise

Humana Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Humana Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Axon Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axon Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Humana and Axon Enterprise

The main advantage of trading using opposite Humana and Axon Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Humana position performs unexpectedly, Axon Enterprise 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 Axon Enterprise will offset losses from the drop in Axon Enterprise's long position.

The idea behind Humana Inc and Axon Enterprise 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.