Correlation Between Southern BancShares and HUMANA

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

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

Diversification Opportunities for Southern BancShares and HUMANA

-0.34

Correlation Coefficient

Southern BancShares  HUMANA

Very good diversification

The 3 months correlation between Southern and HUMANA is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Southern BancShares NC and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Southern BancShares 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 Southern BancShares NC 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 Southern BancShares i.e., Southern BancShares and HUMANA go up and down completely randomly.

Pair Corralation between Southern BancShares and HUMANA

Given the investment horizon of 90 days Southern BancShares NC is expected to generate 0.99 times more return on investment than HUMANA. However, Southern BancShares NC is 1.01 times less risky than HUMANA. It trades about 0.62 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.2 per unit of risk. If you would invest  709,400  in Southern BancShares NC on September 22, 2024 and sell it today you would earn a total of  105,600  from holding Southern BancShares NC or generate 14.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Southern BancShares NC  vs.  HUMANA INC

Southern BancShares

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern BancShares NC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Southern BancShares 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 uncertain 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 Southern BancShares and HUMANA

The main advantage of trading using opposite Southern BancShares and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern BancShares 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 Southern BancShares NC 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.