Correlation Between Humana and SoftBank Group

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

By analyzing existing cross correlation between Humana Inc and SoftBank Group Corp, you can compare the effects of market volatilities on Humana and SoftBank Group 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 SoftBank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and SoftBank Group.

Diversification Opportunities for Humana and SoftBank Group

0.25

Correlation Coefficient

Humana  SoftBank Group

Modest diversification

The 3 months correlation between Humana and SoftBank is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and SoftBank Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftBank Group Corp 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 SoftBank Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftBank Group Corp has no effect on the direction of Humana i.e., Humana and SoftBank Group go up and down completely randomly.

Pair Corralation between Humana and SoftBank Group

Assuming the 90 days trading horizon Humana Inc is expected to under-perform the SoftBank Group. In addition to that, Humana is 1.1 times more volatile than SoftBank Group Corp. It trades about -0.07 of its total potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.06 per unit of volatility. If you would invest  841,213  in SoftBank Group Corp on September 3, 2024 and sell it today you would earn a total of  49,387  from holding SoftBank Group Corp or generate 5.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	66.15%
Values	Daily Returns

Humana Inc  vs.  SoftBank Group Corp

Humana Inc

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

SoftBank Group Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, SoftBank Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Humana and SoftBank Group

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

The idea behind Humana Inc and SoftBank Group 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.