Correlation Between HUMANA and Global Tech

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

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

Diversification Opportunities for HUMANA and Global Tech

0.7

Correlation Coefficient

HUMANA  Global Tech

Poor diversification

The 3 months correlation between HUMANA and Global is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Global Tech Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Tech Industries 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 Global Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Tech Industries has no effect on the direction of HUMANA i.e., HUMANA and Global Tech go up and down completely randomly.

Pair Corralation between HUMANA and Global Tech

Assuming the 90 days trading horizon HUMANA is expected to generate 270.35 times less return on investment than Global Tech. But when comparing it to its historical volatility, HUMANA INC is 62.39 times less risky than Global Tech. It trades about 0.05 of its potential returns per unit of risk. Global Tech Industries is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Global Tech Industries on December 29, 2024 and sell it today you would earn a total of  9.00  from holding Global Tech Industries or generate 450.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

HUMANA INC  vs.  Global Tech Industries

HUMANA INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Global Tech Industries

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Tech Industries are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Global Tech demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Global Tech

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

The idea behind HUMANA INC and Global Tech Industries 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.