Correlation Between Pets At and Humana

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

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

Diversification Opportunities for Pets At and Humana

-0.04

Correlation Coefficient

Pets At  Humana

Good diversification

The 3 months correlation between Pets and Humana is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Pets at Home and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and Pets At 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 Pets at Home 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 Pets At i.e., Pets At and Humana go up and down completely randomly.

Pair Corralation between Pets At and Humana

Assuming the 90 days trading horizon Pets at Home is expected to under-perform the Humana. But the stock apears to be less risky and, when comparing its historical volatility, Pets at Home is 1.29 times less risky than Humana. The stock trades about -0.16 of its potential returns per unit of risk. The Humana Inc is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  36,402  in Humana Inc on September 5, 2024 and sell it today you would lose (7,142) from holding Humana Inc or give up 19.62% of portfolio value over 90 days.

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

Pets at Home  vs.  Humana Inc

Pets at Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pets at Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Pets At and Humana

The main advantage of trading using opposite Pets At and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pets At 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 Pets at Home 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.