Correlation Between Nine Dragons and Humana

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

By analyzing existing cross correlation between Nine Dragons Paper and Humana Inc, you can compare the effects of market volatilities on Nine Dragons 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 Nine Dragons with a short position of Humana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nine Dragons and Humana.

Diversification Opportunities for Nine Dragons and Humana

-0.5

Correlation Coefficient

Nine Dragons  Humana

Very good diversification

The 3 months correlation between Nine and Humana is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nine Dragons Paper and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and Nine Dragons 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 Nine Dragons Paper 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 Nine Dragons i.e., Nine Dragons and Humana go up and down completely randomly.

Pair Corralation between Nine Dragons and Humana

Assuming the 90 days horizon Nine Dragons Paper is expected to generate 2.15 times more return on investment than Humana. However, Nine Dragons is 2.15 times more volatile than Humana Inc. It trades about 0.1 of its potential returns per unit of risk. Humana Inc is currently generating about -0.02 per unit of risk. If you would invest  36.00  in Nine Dragons Paper on September 16, 2024 and sell it today you would earn a total of  3.00  from holding Nine Dragons Paper or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nine Dragons Paper  vs.  Humana Inc

Nine Dragons Paper

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nine Dragons Paper are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nine Dragons reported solid returns over the last few months and may actually be approaching a breakup point.

Humana Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humana Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Humana is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nine Dragons and Humana

The main advantage of trading using opposite Nine Dragons and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nine Dragons 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 Nine Dragons Paper 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.