Correlation Between Alpha Star and HUMANA

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

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

Diversification Opportunities for Alpha Star and HUMANA

0.21

Correlation Coefficient

Alpha Star  HUMANA

Modest diversification

The 3 months correlation between Alpha and HUMANA is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Star Acquisition and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Alpha Star 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 Alpha Star Acquisition 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 Alpha Star i.e., Alpha Star and HUMANA go up and down completely randomly.

Pair Corralation between Alpha Star and HUMANA

Assuming the 90 days horizon Alpha Star Acquisition is expected to generate 34.15 times more return on investment than HUMANA. However, Alpha Star is 34.15 times more volatile than HUMANA INC. It trades about 0.05 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.18 per unit of risk. If you would invest  1.25  in Alpha Star Acquisition on September 13, 2024 and sell it today you would lose (0.48) from holding Alpha Star Acquisition or give up 38.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	39.34%
Values	Daily Returns

Alpha Star Acquisition  vs.  HUMANA INC

Alpha Star Acquisition

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Alpha Star Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Alpha Star showed solid returns over the last few months and may actually be approaching a breakup point.

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 Alpha Star and HUMANA

The main advantage of trading using opposite Alpha Star and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Star 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 Alpha Star Acquisition 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.