Correlation Between Jacobs Solutions and HUMANA

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

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

Diversification Opportunities for Jacobs Solutions and HUMANA

0.16

Correlation Coefficient

Jacobs Solutions  HUMANA

Average diversification

The 3 months correlation between Jacobs and HUMANA is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Jacobs Solutions 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 Jacobs Solutions 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 Jacobs Solutions i.e., Jacobs Solutions and HUMANA go up and down completely randomly.

Pair Corralation between Jacobs Solutions and HUMANA

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 2.13 times more return on investment than HUMANA. However, Jacobs Solutions is 2.13 times more volatile than HUMANA INC. It trades about 0.04 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.06 per unit of risk. If you would invest  11,444  in Jacobs Solutions on October 6, 2024 and sell it today you would earn a total of  1,936  from holding Jacobs Solutions or generate 16.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.06%
Values	Daily Returns

Jacobs Solutions  vs.  HUMANA INC

Jacobs Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jacobs Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady forward-looking indicators, Jacobs Solutions is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

HUMANA INC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jacobs Solutions and HUMANA

The main advantage of trading using opposite Jacobs Solutions and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacobs Solutions 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 Jacobs Solutions 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.