Correlation Between Link Reservations and HUMANA

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

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

Diversification Opportunities for Link Reservations and HUMANA

0.0

Correlation Coefficient

Link Reservations  HUMANA

Pay attention - limited upside

The 3 months correlation between Link and HUMANA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Link Reservations and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Link Reservations 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 Link Reservations 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 Link Reservations i.e., Link Reservations and HUMANA go up and down completely randomly.

Pair Corralation between Link Reservations and HUMANA

Given the investment horizon of 90 days Link Reservations is expected to generate 40.52 times more return on investment than HUMANA. However, Link Reservations is 40.52 times more volatile than HUMANA INC. It trades about 0.09 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.01 per unit of risk. If you would invest  0.30  in Link Reservations on December 2, 2024 and sell it today you would lose (0.20) from holding Link Reservations or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.38%
Values	Daily Returns

Link Reservations  vs.  HUMANA INC

Link Reservations

Risk-Adjusted Performance

Very Weak

Over the last 90 days Link Reservations has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Link Reservations is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

HUMANA INC

Risk-Adjusted Performance

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

Pair Trading with Link Reservations and HUMANA

The main advantage of trading using opposite Link Reservations and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Link Reservations 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 Link Reservations 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.