Correlation Between HUMANA and Bri Chem

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

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

Diversification Opportunities for HUMANA and Bri Chem

0.17

Correlation Coefficient

HUMANA  Bri Chem

Average diversification

The 3 months correlation between HUMANA and Bri is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem 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 Bri Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of HUMANA i.e., HUMANA and Bri Chem go up and down completely randomly.

Pair Corralation between HUMANA and Bri Chem

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Bri Chem. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 8.38 times less risky than Bri Chem. The bond trades about -0.19 of its potential returns per unit of risk. The Bri Chem Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Bri Chem Corp on September 14, 2024 and sell it today you would lose (2.00) from holding Bri Chem Corp or give up 8.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

HUMANA INC  vs.  Bri Chem Corp

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 inconsistent 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.

Bri Chem Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Bri Chem may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HUMANA and Bri Chem

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

The idea behind HUMANA INC and Bri Chem 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.