Correlation Between HUMANA and Hannan Metals

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

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

Diversification Opportunities for HUMANA and Hannan Metals

0.73

Correlation Coefficient

HUMANA  Hannan Metals

Poor diversification

The 3 months correlation between HUMANA and Hannan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Hannan Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannan Metals 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 Hannan Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannan Metals has no effect on the direction of HUMANA i.e., HUMANA and Hannan Metals go up and down completely randomly.

Pair Corralation between HUMANA and Hannan Metals

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Hannan Metals. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 7.31 times less risky than Hannan Metals. The bond trades about -0.09 of its potential returns per unit of risk. The Hannan Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Hannan Metals on September 3, 2024 and sell it today you would lose (1.00) from holding Hannan Metals or give up 2.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

HUMANA INC  vs.  Hannan Metals

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.

Hannan Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hannan Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hannan Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HUMANA and Hannan Metals

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

The idea behind HUMANA INC and Hannan Metals 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.