Correlation Between HUMANA and CD Projekt

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

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

Diversification Opportunities for HUMANA and CD Projekt

0.38

Correlation Coefficient

HUMANA  CD Projekt

Weak diversification

The 3 months correlation between HUMANA and OTGLF is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and CD Projekt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CD Projekt SA 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 CD Projekt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CD Projekt SA has no effect on the direction of HUMANA i.e., HUMANA and CD Projekt go up and down completely randomly.

Pair Corralation between HUMANA and CD Projekt

Assuming the 90 days trading horizon HUMANA INC is expected to generate 25.51 times more return on investment than CD Projekt. However, HUMANA is 25.51 times more volatile than CD Projekt SA. It trades about 0.07 of its potential returns per unit of risk. CD Projekt SA is currently generating about 0.04 per unit of risk. If you would invest  7,953  in HUMANA INC on September 12, 2024 and sell it today you would lose (258.00) from holding HUMANA INC or give up 3.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.13%
Values	Daily Returns

HUMANA INC  vs.  CD Projekt SA

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.

CD Projekt SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CD Projekt SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, CD Projekt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HUMANA and CD Projekt

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

The idea behind HUMANA INC and CD Projekt SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.