Correlation Between Grupo Financiero and HUMANA

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

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

Diversification Opportunities for Grupo Financiero and HUMANA

0.09

Correlation Coefficient

Grupo Financiero  HUMANA

Significant diversification

The 3 months correlation between Grupo and HUMANA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Inbursa and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Grupo Financiero 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 Grupo Financiero Inbursa 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 Grupo Financiero i.e., Grupo Financiero and HUMANA go up and down completely randomly.

Pair Corralation between Grupo Financiero and HUMANA

Assuming the 90 days horizon Grupo Financiero Inbursa is expected to generate 3.18 times more return on investment than HUMANA. However, Grupo Financiero is 3.18 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 -0.06 per unit of risk. If you would invest  215.00  in Grupo Financiero Inbursa on December 1, 2024 and sell it today you would earn a total of  31.00  from holding Grupo Financiero Inbursa or generate 14.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Grupo Financiero Inbursa  vs.  HUMANA INC

Grupo Financiero Inbursa

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Inbursa are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Grupo Financiero reported 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grupo Financiero and HUMANA

The main advantage of trading using opposite Grupo Financiero and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Financiero 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 Grupo Financiero Inbursa 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.