Correlation Between HUMANA and Absolute Health

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

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

Diversification Opportunities for HUMANA and Absolute Health

0.22

Correlation Coefficient

HUMANA  Absolute Health

Modest diversification

The 3 months correlation between HUMANA and Absolute is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Absolute Health and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Health 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 Absolute Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Health has no effect on the direction of HUMANA i.e., HUMANA and Absolute Health go up and down completely randomly.

Pair Corralation between HUMANA and Absolute Health

Assuming the 90 days trading horizon HUMANA INC is expected to generate 0.06 times more return on investment than Absolute Health. However, HUMANA INC is 15.58 times less risky than Absolute Health. It trades about -0.16 of its potential returns per unit of risk. Absolute Health and is currently generating about -0.13 per unit of risk. If you would invest  8,376  in HUMANA INC on September 4, 2024 and sell it today you would lose (681.00) from holding HUMANA INC or give up 8.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

HUMANA INC  vs.  Absolute Health and

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 unfluctuating 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.

Absolute Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Health and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with HUMANA and Absolute Health

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

The idea behind HUMANA INC and Absolute Health and 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.