Correlation Between Alliance Global and HUMANA

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

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

Diversification Opportunities for Alliance Global and HUMANA

0.14

Correlation Coefficient

Alliance Global  HUMANA

Average diversification

The 3 months correlation between Alliance and HUMANA is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Global Group and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Alliance Global 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 Alliance Global 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 Alliance Global i.e., Alliance Global and HUMANA go up and down completely randomly.

Pair Corralation between Alliance Global and HUMANA

Assuming the 90 days horizon Alliance Global Group is expected to generate 1.71 times more return on investment than HUMANA. However, Alliance Global is 1.71 times more volatile than HUMANA INC. It trades about -0.1 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.17 per unit of risk. If you would invest  807.00  in Alliance Global Group on September 5, 2024 and sell it today you would lose (71.00) from holding Alliance Global Group or give up 8.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Alliance Global Group  vs.  HUMANA INC

Alliance Global Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 uncertain 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 Alliance Global and HUMANA

The main advantage of trading using opposite Alliance Global and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Global 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 Alliance Global 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.