Correlation Between IShares Morningstar and HUMANA

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

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

Diversification Opportunities for IShares Morningstar and HUMANA

-0.61

Correlation Coefficient

IShares Morningstar  HUMANA

Excellent diversification

The 3 months correlation between IShares and HUMANA is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares Morningstar Mid Cap and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and IShares Morningstar 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 iShares Morningstar Mid Cap 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 IShares Morningstar i.e., IShares Morningstar and HUMANA go up and down completely randomly.

Pair Corralation between IShares Morningstar and HUMANA

Given the investment horizon of 90 days iShares Morningstar Mid Cap is expected to generate 1.11 times more return on investment than HUMANA. However, IShares Morningstar is 1.11 times more volatile than HUMANA INC. It trades about 0.18 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.11 per unit of risk. If you would invest  7,453  in iShares Morningstar Mid Cap on September 4, 2024 and sell it today you would earn a total of  584.00  from holding iShares Morningstar Mid Cap or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

iShares Morningstar Mid Cap  vs.  HUMANA INC

iShares Morningstar Mid

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Morningstar Mid Cap are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, IShares Morningstar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Morningstar and HUMANA

The main advantage of trading using opposite IShares Morningstar and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Morningstar 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 iShares Morningstar Mid Cap 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.