Correlation Between MBT Bancshares and HUMANA

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

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

Diversification Opportunities for MBT Bancshares and HUMANA

-0.17

Correlation Coefficient

MBT Bancshares  HUMANA

Good diversification

The 3 months correlation between MBT and HUMANA is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding MBT Bancshares and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and MBT Bancshares 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 MBT Bancshares 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 MBT Bancshares i.e., MBT Bancshares and HUMANA go up and down completely randomly.

Pair Corralation between MBT Bancshares and HUMANA

Given the investment horizon of 90 days MBT Bancshares is expected to generate 0.68 times more return on investment than HUMANA. However, MBT Bancshares is 1.48 times less risky than HUMANA. It trades about 0.12 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.05 per unit of risk. If you would invest  2,000  in MBT Bancshares on December 30, 2024 and sell it today you would earn a total of  75.00  from holding MBT Bancshares or generate 3.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

MBT Bancshares  vs.  HUMANA INC

MBT Bancshares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MBT Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, MBT Bancshares is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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

Pair Trading with MBT Bancshares and HUMANA

The main advantage of trading using opposite MBT Bancshares and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MBT Bancshares 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 MBT Bancshares 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 Global Correlations module to find global opportunities by holding instruments from different markets.