Correlation Between HUMANA and North Dallas

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

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

Diversification Opportunities for HUMANA and North Dallas

-0.27

Correlation Coefficient

HUMANA  North Dallas

Very good diversification

The 3 months correlation between HUMANA and North is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and North Dallas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Dallas Bank 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 North Dallas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Dallas Bank has no effect on the direction of HUMANA i.e., HUMANA and North Dallas go up and down completely randomly.

Pair Corralation between HUMANA and North Dallas

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the North Dallas. In addition to that, HUMANA is 6.42 times more volatile than North Dallas Bank. It trades about -0.18 of its total potential returns per unit of risk. North Dallas Bank is currently generating about 0.14 per unit of volatility. If you would invest  4,775  in North Dallas Bank on September 19, 2024 and sell it today you would earn a total of  25.00  from holding North Dallas Bank or generate 0.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

HUMANA INC  vs.  North Dallas Bank

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 weak 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.

North Dallas Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North Dallas Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, North Dallas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HUMANA and North Dallas

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

The idea behind HUMANA INC and North Dallas Bank 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.