Correlation Between Rave Restaurant and HUMANA

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

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

Diversification Opportunities for Rave Restaurant and HUMANA

-0.47

Correlation Coefficient

Rave Restaurant  HUMANA

Very good diversification

The 3 months correlation between Rave and HUMANA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant Group and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Rave Restaurant 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 Rave Restaurant Group 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 Rave Restaurant i.e., Rave Restaurant and HUMANA go up and down completely randomly.

Pair Corralation between Rave Restaurant and HUMANA

Given the investment horizon of 90 days Rave Restaurant Group is expected to generate 5.47 times more return on investment than HUMANA. However, Rave Restaurant is 5.47 times more volatile than HUMANA INC. It trades about 0.22 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.19 per unit of risk. If you would invest  176.00  in Rave Restaurant Group on September 16, 2024 and sell it today you would earn a total of  126.00  from holding Rave Restaurant Group or generate 71.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Rave Restaurant Group  vs.  HUMANA INC

Rave Restaurant Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rave Restaurant exhibited 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 latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HUMANA INC investors.

Pair Trading with Rave Restaurant and HUMANA

The main advantage of trading using opposite Rave Restaurant and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rave Restaurant 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 Rave Restaurant Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.