Correlation Between HUMANA and SPDR SP

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

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

Diversification Opportunities for HUMANA and SPDR SP

0.21

Correlation Coefficient

HUMANA  SPDR SP

Modest diversification

The 3 months correlation between HUMANA and SPDR is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and SPDR SP International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP International 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP International has no effect on the direction of HUMANA i.e., HUMANA and SPDR SP go up and down completely randomly.

Pair Corralation between HUMANA and SPDR SP

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the SPDR SP. In addition to that, HUMANA is 1.57 times more volatile than SPDR SP International. It trades about -0.13 of its total potential returns per unit of risk. SPDR SP International is currently generating about -0.12 per unit of volatility. If you would invest  3,342  in SPDR SP International on September 13, 2024 and sell it today you would lose (124.00) from holding SPDR SP International or give up 3.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.02%
Values	Daily Returns

HUMANA INC  vs.  SPDR SP International

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 uncertain 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.

SPDR SP International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP 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 SPDR SP

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

The idea behind HUMANA INC and SPDR SP International 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.