Correlation Between HUMANA and ESH Acquisition

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

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

Diversification Opportunities for HUMANA and ESH Acquisition

-0.44

Correlation Coefficient

HUMANA  ESH Acquisition

Very good diversification

The 3 months correlation between HUMANA and ESH is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition 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 ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of HUMANA i.e., HUMANA and ESH Acquisition go up and down completely randomly.

Pair Corralation between HUMANA and ESH Acquisition

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the ESH Acquisition. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.46 times less risky than ESH Acquisition. The bond trades about -0.01 of its potential returns per unit of risk. The ESH Acquisition Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,025  in ESH Acquisition Corp on October 7, 2024 and sell it today you would earn a total of  75.00  from holding ESH Acquisition Corp or generate 7.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.58%
Values	Daily Returns

HUMANA INC  vs.  ESH Acquisition 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 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.

ESH Acquisition Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUMANA and ESH Acquisition

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

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