Correlation Between Absa Group and HUMANA

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

By analyzing existing cross correlation between Absa Group Ltd and HUMANA INC, you can compare the effects of market volatilities on Absa Group and HUMANA 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 Absa Group with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa Group and HUMANA.

Diversification Opportunities for Absa Group and HUMANA

-0.34

Correlation Coefficient

Absa Group  HUMANA

Very good diversification

The 3 months correlation between Absa and HUMANA is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Absa Group Ltd and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Absa Group 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 Absa Group Ltd are associated (or correlated) with HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of Absa Group i.e., Absa Group and HUMANA go up and down completely randomly.

Pair Corralation between Absa Group and HUMANA

Assuming the 90 days horizon Absa Group Ltd is expected to under-perform the HUMANA. In addition to that, Absa Group is 1.74 times more volatile than HUMANA INC. It trades about -0.12 of its total potential returns per unit of risk. HUMANA INC is currently generating about 0.1 per unit of volatility. If you would invest  8,012  in HUMANA INC on October 20, 2024 and sell it today you would earn a total of  174.00  from holding HUMANA INC or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Absa Group Ltd  vs.  HUMANA INC

Absa Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Group Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Absa Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HUMANA INC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Absa Group and HUMANA

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

The idea behind Absa Group Ltd and HUMANA INC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.