Correlation Between HUMANA and Gold Reserve

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

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

Diversification Opportunities for HUMANA and Gold Reserve

0.37

Correlation Coefficient

HUMANA  Gold Reserve

Weak diversification

The 3 months correlation between HUMANA and Gold is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Gold Reserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Reserve 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 Gold Reserve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Reserve has no effect on the direction of HUMANA i.e., HUMANA and Gold Reserve go up and down completely randomly.

Pair Corralation between HUMANA and Gold Reserve

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Gold Reserve. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 5.43 times less risky than Gold Reserve. The bond trades about -0.07 of its potential returns per unit of risk. The Gold Reserve is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  155.00  in Gold Reserve on November 29, 2024 and sell it today you would earn a total of  28.00  from holding Gold Reserve or generate 18.06% return on investment over 90 days.

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

HUMANA INC  vs.  Gold Reserve

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.

Gold Reserve

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Reserve are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Reserve reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Gold Reserve

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

The idea behind HUMANA INC and Gold Reserve 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.