Correlation Between HUMANA and Electronic Systems

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

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

Diversification Opportunities for HUMANA and Electronic Systems

0.36

Correlation Coefficient

HUMANA  Electronic Systems

Weak diversification

The 3 months correlation between HUMANA and Electronic is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Electronic Systems Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Systems 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 Electronic Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Systems has no effect on the direction of HUMANA i.e., HUMANA and Electronic Systems go up and down completely randomly.

Pair Corralation between HUMANA and Electronic Systems

Assuming the 90 days trading horizon HUMANA INC is expected to generate 0.15 times more return on investment than Electronic Systems. However, HUMANA INC is 6.81 times less risky than Electronic Systems. It trades about -0.07 of its potential returns per unit of risk. Electronic Systems Technology is currently generating about -0.17 per unit of risk. If you would invest  8,195  in HUMANA INC on November 29, 2024 and sell it today you would lose (296.00) from holding HUMANA INC or give up 3.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

HUMANA INC  vs.  Electronic Systems Technology

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Electronic Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electronic Systems Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HUMANA and Electronic Systems

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

The idea behind HUMANA INC and Electronic Systems Technology 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.