Correlation Between HUMANA and Financial

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

By analyzing existing cross correlation between HUMANA INC and Financial 15 Split, you can compare the effects of market volatilities on HUMANA and Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and Financial.

Diversification Opportunities for HUMANA and Financial

-0.48

Correlation Coefficient

HUMANA  Financial

Very good diversification

The 3 months correlation between HUMANA and Financial is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of HUMANA i.e., HUMANA and Financial go up and down completely randomly.

Pair Corralation between HUMANA and Financial

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Financial. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.77 times less risky than Financial. The bond trades about -0.18 of its potential returns per unit of risk. The Financial 15 Split is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  605.00  in Financial 15 Split on September 12, 2024 and sell it today you would earn a total of  89.00  from holding Financial 15 Split or generate 14.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

HUMANA INC  vs.  Financial 15 Split

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 weak 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.

Financial 15 Split

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Financial

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

The idea behind HUMANA INC and Financial 15 Split 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.