Correlation Between Goldman Sachs and HUMANA

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

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

Diversification Opportunities for Goldman Sachs and HUMANA

0.64

Correlation Coefficient

Goldman Sachs  HUMANA

Poor diversification

The 3 months correlation between Goldman and HUMANA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Mid and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Goldman Sachs 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 Goldman Sachs Mid 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 Goldman Sachs i.e., Goldman Sachs and HUMANA go up and down completely randomly.

Pair Corralation between Goldman Sachs and HUMANA

Assuming the 90 days horizon Goldman Sachs Mid is expected to under-perform the HUMANA. In addition to that, Goldman Sachs is 1.91 times more volatile than HUMANA INC. It trades about -0.09 of its total potential returns per unit of risk. HUMANA INC is currently generating about -0.05 per unit of volatility. If you would invest  8,186  in HUMANA INC on October 7, 2024 and sell it today you would lose (151.00) from holding HUMANA INC or give up 1.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Goldman Sachs Mid  vs.  HUMANA INC

Goldman Sachs Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund 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. 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 Goldman Sachs and HUMANA

The main advantage of trading using opposite Goldman Sachs and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs 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 Goldman Sachs Mid 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.