Correlation Between Renesas Electronics and HUMANA

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

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

Diversification Opportunities for Renesas Electronics and HUMANA

0.13

Correlation Coefficient

Renesas Electronics  HUMANA

Average diversification

The 3 months correlation between Renesas and HUMANA is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Renesas Electronics 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 Renesas Electronics 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 Renesas Electronics i.e., Renesas Electronics and HUMANA go up and down completely randomly.

Pair Corralation between Renesas Electronics and HUMANA

Assuming the 90 days horizon Renesas Electronics is expected to generate 7.43 times more return on investment than HUMANA. However, Renesas Electronics is 7.43 times more volatile than HUMANA INC. It trades about 0.01 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.02 per unit of risk. If you would invest  1,590  in Renesas Electronics on October 4, 2024 and sell it today you would lose (285.00) from holding Renesas Electronics or give up 17.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.58%
Values	Daily Returns

Renesas Electronics  vs.  HUMANA INC

Renesas Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

HUMANA INC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 3 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Renesas Electronics and HUMANA

The main advantage of trading using opposite Renesas Electronics and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renesas Electronics 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 Renesas Electronics 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.