Correlation Between Definitive Healthcare and HUMANA

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

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

Diversification Opportunities for Definitive Healthcare and HUMANA

-0.1

Correlation Coefficient

Definitive Healthcare  HUMANA

Good diversification

The 3 months correlation between Definitive and HUMANA is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Definitive Healthcare 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 Definitive Healthcare 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 Definitive Healthcare i.e., Definitive Healthcare and HUMANA go up and down completely randomly.

Pair Corralation between Definitive Healthcare and HUMANA

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to under-perform the HUMANA. In addition to that, Definitive Healthcare is 6.89 times more volatile than HUMANA INC. It trades about -0.06 of its total potential returns per unit of risk. HUMANA INC is currently generating about -0.01 per unit of volatility. If you would invest  8,127  in HUMANA INC on October 9, 2024 and sell it today you would lose (92.00) from holding HUMANA INC or give up 1.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.57%
Values	Daily Returns

Definitive Healthcare Corp  vs.  HUMANA INC

Definitive Healthcare

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Definitive Healthcare Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

HUMANA INC

Risk-Adjusted Performance

0 of 100

Insignificant

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 Definitive Healthcare and HUMANA

The main advantage of trading using opposite Definitive Healthcare and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definitive Healthcare 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 Definitive Healthcare 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.