Correlation Between HUMANA and Agro Capital

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

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

Diversification Opportunities for HUMANA and Agro Capital

0.35

Correlation Coefficient

HUMANA  Agro Capital

Weak diversification

The 3 months correlation between HUMANA and Agro is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Agro Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Capital Management and HUMANA 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 HUMANA INC are associated (or correlated) with Agro Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Capital Management has no effect on the direction of HUMANA i.e., HUMANA and Agro Capital go up and down completely randomly.

Pair Corralation between HUMANA and Agro Capital

Assuming the 90 days trading horizon HUMANA is expected to generate 71.08 times less return on investment than Agro Capital. But when comparing it to its historical volatility, HUMANA INC is 30.31 times less risky than Agro Capital. It trades about 0.05 of its potential returns per unit of risk. Agro Capital Management is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2.25  in Agro Capital Management on December 30, 2024 and sell it today you would earn a total of  1.25  from holding Agro Capital Management or generate 55.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

HUMANA INC  vs.  Agro Capital Management

HUMANA INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 4 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Agro Capital Management

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agro Capital Management are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Agro Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Agro Capital

The main advantage of trading using opposite HUMANA and Agro Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, Agro Capital 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 Agro Capital will offset losses from the drop in Agro Capital's long position.

The idea behind HUMANA INC and Agro Capital Management 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.