Correlation Between Humana and Centene Corp

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

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

Diversification Opportunities for Humana and Centene Corp

-0.07

Correlation Coefficient

Humana  Centene Corp

Good diversification

The 3 months correlation between Humana and Centene is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Centene Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centene Corp and Humana 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 Humana Inc are associated (or correlated) with Centene Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centene Corp has no effect on the direction of Humana i.e., Humana and Centene Corp go up and down completely randomly.

Pair Corralation between Humana and Centene Corp

Assuming the 90 days horizon Humana Inc is expected to generate 1.37 times more return on investment than Centene Corp. However, Humana is 1.37 times more volatile than Centene Corp. It trades about -0.02 of its potential returns per unit of risk. Centene Corp is currently generating about -0.11 per unit of risk. If you would invest  28,729  in Humana Inc on September 14, 2024 and sell it today you would lose (2,479) from holding Humana Inc or give up 8.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Humana Inc  vs.  Centene Corp

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 nearly stable basic indicators, Humana is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Centene Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centene Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Humana and Centene Corp

The main advantage of trading using opposite Humana and Centene Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Humana position performs unexpectedly, Centene Corp 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 Centene Corp will offset losses from the drop in Centene Corp's long position.

The idea behind Humana Inc and Centene Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.