Correlation Between Metal Sky and HUMANA

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

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

Diversification Opportunities for Metal Sky and HUMANA

0.02

Correlation Coefficient

Metal Sky  HUMANA

Significant diversification

The 3 months correlation between Metal and HUMANA is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Metal Sky Star and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Metal Sky 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 Metal Sky Star 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 Metal Sky i.e., Metal Sky and HUMANA go up and down completely randomly.

Pair Corralation between Metal Sky and HUMANA

Assuming the 90 days horizon Metal Sky is expected to generate 1.6 times less return on investment than HUMANA. In addition to that, Metal Sky is 2.04 times more volatile than HUMANA INC. It trades about 0.02 of its total potential returns per unit of risk. HUMANA INC is currently generating about 0.05 per unit of volatility. If you would invest  7,999  in HUMANA INC on December 30, 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 Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Metal Sky Star  vs.  HUMANA INC

Metal Sky Star

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metal Sky Star are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Metal Sky is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metal Sky and HUMANA

The main advantage of trading using opposite Metal Sky and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metal Sky 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 Metal Sky Star 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.