Correlation Between HUMANA and Grupo Financiero

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

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

Diversification Opportunities for HUMANA and Grupo Financiero

0.23

Correlation Coefficient

HUMANA  Grupo Financiero

Modest diversification

The 3 months correlation between HUMANA and Grupo is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Grupo Financiero Inbursa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Inbursa 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Inbursa has no effect on the direction of HUMANA i.e., HUMANA and Grupo Financiero go up and down completely randomly.

Pair Corralation between HUMANA and Grupo Financiero

Assuming the 90 days trading horizon HUMANA INC is expected to generate 0.31 times more return on investment than Grupo Financiero. However, HUMANA INC is 3.18 times less risky than Grupo Financiero. It trades about -0.09 of its potential returns per unit of risk. Grupo Financiero Inbursa is currently generating about -0.07 per unit of risk. If you would invest  8,325  in HUMANA INC on September 3, 2024 and sell it today you would lose (290.00) from holding HUMANA INC or give up 3.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

HUMANA INC  vs.  Grupo Financiero Inbursa

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

Grupo Financiero Inbursa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Financiero Inbursa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HUMANA and Grupo Financiero

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

The idea behind HUMANA INC and Grupo Financiero Inbursa 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.