Correlation Between BrightSpring Health and Humana

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

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

Diversification Opportunities for BrightSpring Health and Humana

0.61

Correlation Coefficient

BrightSpring Health  Humana

Poor diversification

The 3 months correlation between BrightSpring and Humana is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BrightSpring Health Services, and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and BrightSpring Health 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 BrightSpring Health Services, 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 BrightSpring Health i.e., BrightSpring Health and Humana go up and down completely randomly.

Pair Corralation between BrightSpring Health and Humana

Given the investment horizon of 90 days BrightSpring Health Services, is expected to generate 1.18 times more return on investment than Humana. However, BrightSpring Health is 1.18 times more volatile than Humana Inc. It trades about 0.09 of its potential returns per unit of risk. Humana Inc is currently generating about -0.04 per unit of risk. If you would invest  1,100  in BrightSpring Health Services, on October 10, 2024 and sell it today you would earn a total of  634.00  from holding BrightSpring Health Services, or generate 57.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	48.39%
Values	Daily Returns

BrightSpring Health Services,  vs.  Humana Inc

BrightSpring Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BrightSpring Health Services, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, BrightSpring Health reported solid returns over the last few months and may actually be approaching a breakup point.

Humana Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Humana Inc are ranked lower than 3 (%) 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 February 2025.

Pair Trading with BrightSpring Health and Humana

The main advantage of trading using opposite BrightSpring Health and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BrightSpring Health 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 BrightSpring Health Services, 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.