Correlation Between Humana and IShares Consumer

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

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

Diversification Opportunities for Humana and IShares Consumer

0.47

Correlation Coefficient

Humana  IShares Consumer

Very weak diversification

The 3 months correlation between Humana and IShares is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and iShares Consumer Discretionary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Dis 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 IShares Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Dis has no effect on the direction of Humana i.e., Humana and IShares Consumer go up and down completely randomly.

Pair Corralation between Humana and IShares Consumer

Considering the 90-day investment horizon Humana Inc is expected to generate 1.76 times more return on investment than IShares Consumer. However, Humana is 1.76 times more volatile than iShares Consumer Discretionary. It trades about 0.05 of its potential returns per unit of risk. iShares Consumer Discretionary is currently generating about -0.12 per unit of risk. If you would invest  25,255  in Humana Inc on December 28, 2024 and sell it today you would earn a total of  1,203  from holding Humana Inc or generate 4.76% return on investment over 90 days.

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

Humana Inc  vs.  iShares Consumer Discretionary

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.

iShares Consumer Dis

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Consumer Discretionary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Humana and IShares Consumer

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

The idea behind Humana Inc and iShares Consumer Discretionary 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.