Correlation Between Humana and Alignment Healthcare

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

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

Diversification Opportunities for Humana and Alignment Healthcare

0.21

Correlation Coefficient

Humana  Alignment Healthcare

Modest diversification

The 3 months correlation between Humana and Alignment is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Alignment Healthcare LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alignment Healthcare LLC 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 Alignment Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alignment Healthcare LLC has no effect on the direction of Humana i.e., Humana and Alignment Healthcare go up and down completely randomly.

Pair Corralation between Humana and Alignment Healthcare

Considering the 90-day investment horizon Humana is expected to generate 8.72 times less return on investment than Alignment Healthcare. But when comparing it to its historical volatility, Humana Inc is 1.6 times less risky than Alignment Healthcare. It trades about 0.05 of its potential returns per unit of risk. Alignment Healthcare LLC is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,116  in Alignment Healthcare LLC on December 29, 2024 and sell it today you would earn a total of  714.00  from holding Alignment Healthcare LLC or generate 63.98% return on investment over 90 days.

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

Humana Inc  vs.  Alignment Healthcare LLC

Humana Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Humana Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Humana is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Alignment Healthcare LLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alignment Healthcare LLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, Alignment Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Humana and Alignment Healthcare

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

The idea behind Humana Inc and Alignment Healthcare LLC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.