Correlation Between American International and HUMANA

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

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

Diversification Opportunities for American International and HUMANA

-0.49

Correlation Coefficient

American International  HUMANA

Very good diversification

The 3 months correlation between American and HUMANA is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and American International 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 American International Group 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 American International i.e., American International and HUMANA go up and down completely randomly.

Pair Corralation between American International and HUMANA

Considering the 90-day investment horizon American International Group is expected to generate 0.91 times more return on investment than HUMANA. However, American International Group is 1.09 times less risky than HUMANA. It trades about -0.14 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.19 per unit of risk. If you would invest  7,538  in American International Group on September 12, 2024 and sell it today you would lose (238.00) from holding American International Group or give up 3.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

American International Group  vs.  HUMANA INC

American International

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days American International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, American International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HUMANA INC investors.

Pair Trading with American International and HUMANA

The main advantage of trading using opposite American International and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American International 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 American International Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.