Correlation Between Arax Holdings and HUMANA

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

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

Diversification Opportunities for Arax Holdings and HUMANA

-0.27

Correlation Coefficient

Arax Holdings  HUMANA

Very good diversification

The 3 months correlation between Arax and HUMANA is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Arax Holdings Corp and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Arax Holdings 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 Arax Holdings Corp 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 Arax Holdings i.e., Arax Holdings and HUMANA go up and down completely randomly.

Pair Corralation between Arax Holdings and HUMANA

Given the investment horizon of 90 days Arax Holdings Corp is expected to generate 37.04 times more return on investment than HUMANA. However, Arax Holdings is 37.04 times more volatile than HUMANA INC. It trades about 0.03 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.06 per unit of risk. If you would invest  53.00  in Arax Holdings Corp on December 3, 2024 and sell it today you would lose (49.30) from holding Arax Holdings Corp or give up 93.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Arax Holdings Corp  vs.  HUMANA INC

Arax Holdings Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arax Holdings Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Arax Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

HUMANA INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Arax Holdings and HUMANA

The main advantage of trading using opposite Arax Holdings and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arax Holdings 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 Arax Holdings Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.