Correlation Between SHIN ETSU and Humana

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

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

Diversification Opportunities for SHIN ETSU and Humana

-0.18

Correlation Coefficient

SHIN ETSU  Humana

Good diversification

The 3 months correlation between SHIN and Humana is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and SHIN ETSU 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 SHIN ETSU CHEMICAL 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 SHIN ETSU i.e., SHIN ETSU and Humana go up and down completely randomly.

Pair Corralation between SHIN ETSU and Humana

Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to generate 0.9 times more return on investment than Humana. However, SHIN ETSU CHEMICAL is 1.11 times less risky than Humana. It trades about 0.04 of its potential returns per unit of risk. Humana Inc is currently generating about -0.04 per unit of risk. If you would invest  2,360  in SHIN ETSU CHEMICAL on September 16, 2024 and sell it today you would earn a total of  940.00  from holding SHIN ETSU CHEMICAL or generate 39.83% return on investment over 90 days.

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

SHIN ETSU CHEMICAL  vs.  Humana Inc

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIN ETSU CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains 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. 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 SHIN ETSU and Humana

The main advantage of trading using opposite SHIN ETSU and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIN ETSU 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 SHIN ETSU CHEMICAL 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.