Correlation Between Humana and Invesco SP

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

By analyzing existing cross correlation between Humana Inc and Invesco SP 500, you can compare the effects of market volatilities on Humana and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and Invesco SP.

Diversification Opportunities for Humana and Invesco SP

-0.02

Correlation Coefficient

Humana  Invesco SP

Good diversification

The 3 months correlation between Humana and Invesco is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Humana i.e., Humana and Invesco SP go up and down completely randomly.

Pair Corralation between Humana and Invesco SP

Considering the 90-day investment horizon Humana Inc is expected to generate 2.58 times more return on investment than Invesco SP. However, Humana is 2.58 times more volatile than Invesco SP 500. It trades about 0.05 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.04 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Humana Inc  vs.  Invesco SP 500

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.

Invesco SP 500

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Invesco SP is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Humana and Invesco SP

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

The idea behind Humana Inc and Invesco SP 500 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.