Correlation Between HUMANA and Isuzu Motors

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

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

Diversification Opportunities for HUMANA and Isuzu Motors

-0.36

Correlation Coefficient

HUMANA  Isuzu Motors

Very good diversification

The 3 months correlation between HUMANA and Isuzu is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Isuzu Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isuzu Motors 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 Isuzu Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isuzu Motors has no effect on the direction of HUMANA i.e., HUMANA and Isuzu Motors go up and down completely randomly.

Pair Corralation between HUMANA and Isuzu Motors

Assuming the 90 days trading horizon HUMANA is expected to generate 1.08 times less return on investment than Isuzu Motors. But when comparing it to its historical volatility, HUMANA INC is 1.91 times less risky than Isuzu Motors. It trades about 0.08 of its potential returns per unit of risk. Isuzu Motors is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,292  in Isuzu Motors on October 26, 2024 and sell it today you would earn a total of  50.00  from holding Isuzu Motors or generate 3.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HUMANA INC  vs.  Isuzu Motors

HUMANA INC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 6 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Isuzu Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Isuzu Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Isuzu Motors 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 Isuzu Motors

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

The idea behind HUMANA INC and Isuzu Motors 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.