Correlation Between American Shared and Humana

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

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

Diversification Opportunities for American Shared and Humana

0.28

Correlation Coefficient

American Shared  Humana

Modest diversification

The 3 months correlation between American and Humana is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding American Shared Hospital and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and American Shared 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 Shared Hospital 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 Shared i.e., American Shared and Humana go up and down completely randomly.

Pair Corralation between American Shared and Humana

Considering the 90-day investment horizon American Shared Hospital is expected to under-perform the Humana. But the stock apears to be less risky and, when comparing its historical volatility, American Shared Hospital is 1.27 times less risky than Humana. The stock trades about -0.1 of its potential returns per unit of risk. The Humana Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  25,338  in Humana Inc on December 28, 2024 and sell it today you would earn a total of  1,700  from holding Humana Inc or generate 6.71% return on investment over 90 days.

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

American Shared Hospital  vs.  Humana Inc

American Shared Hospital

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Shared Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Humana Inc

Risk-Adjusted Performance

Insignificant

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

Pair Trading with American Shared and Humana

The main advantage of trading using opposite American Shared and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Shared 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 Shared Hospital 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.