Correlation Between Cencora and Humana

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

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

Diversification Opportunities for Cencora and Humana

0.31

Correlation Coefficient

Cencora  Humana

Weak diversification

The 3 months correlation between Cencora and Humana is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cencora and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and Cencora 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 Cencora 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 Cencora i.e., Cencora and Humana go up and down completely randomly.

Pair Corralation between Cencora and Humana

Considering the 90-day investment horizon Cencora is expected to generate 0.38 times more return on investment than Humana. However, Cencora is 2.65 times less risky than Humana. It trades about 0.08 of its potential returns per unit of risk. Humana Inc is currently generating about -0.09 per unit of risk. If you would invest  23,571  in Cencora on September 5, 2024 and sell it today you would earn a total of  1,434  from holding Cencora or generate 6.08% return on investment over 90 days.

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

Cencora  vs.  Humana Inc

Cencora

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cencora are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Cencora is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail 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. In spite of abnormal performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Cencora and Humana

The main advantage of trading using opposite Cencora and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cencora 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 Cencora 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 Stocks Directory module to find actively traded stocks across global markets.