Correlation Between Knife River and HUMANA

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

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

Diversification Opportunities for Knife River and HUMANA

-0.41

Correlation Coefficient

Knife River  HUMANA

Very good diversification

The 3 months correlation between Knife and HUMANA is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Knife River 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 Knife River 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 Knife River i.e., Knife River and HUMANA go up and down completely randomly.

Pair Corralation between Knife River and HUMANA

Considering the 90-day investment horizon Knife River is expected to under-perform the HUMANA. In addition to that, Knife River is 3.79 times more volatile than HUMANA INC. It trades about -0.04 of its total potential returns per unit of risk. HUMANA INC is currently generating about 0.06 per unit of volatility. If you would invest  7,999  in HUMANA INC on December 28, 2024 and sell it today you would earn a total of  198.00  from holding HUMANA INC or generate 2.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Knife River  vs.  HUMANA INC

Knife River

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knife River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HUMANA INC

Risk-Adjusted Performance

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

Pair Trading with Knife River and HUMANA

The main advantage of trading using opposite Knife River and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River 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 Knife River 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.