Correlation Between HUMANA and Atlas Corp

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

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

Diversification Opportunities for HUMANA and Atlas Corp

0.39

Correlation Coefficient

HUMANA  Atlas Corp

Weak diversification

The 3 months correlation between HUMANA and Atlas is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Atlas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Corp 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 Atlas Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Corp has no effect on the direction of HUMANA i.e., HUMANA and Atlas Corp go up and down completely randomly.

Pair Corralation between HUMANA and Atlas Corp

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Atlas Corp. In addition to that, HUMANA is 1.35 times more volatile than Atlas Corp. It trades about -0.04 of its total potential returns per unit of risk. Atlas Corp is currently generating about 0.07 per unit of volatility. If you would invest  2,420  in Atlas Corp on December 10, 2024 and sell it today you would earn a total of  106.00  from holding Atlas Corp or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

HUMANA INC  vs.  Atlas Corp

HUMANA INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Atlas Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Atlas Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HUMANA and Atlas Corp

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

The idea behind HUMANA INC and Atlas Corp 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.