Correlation Between HUMANA and Outokumpu Oyj

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

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

Diversification Opportunities for HUMANA and Outokumpu Oyj

0.44

Correlation Coefficient

HUMANA  Outokumpu Oyj

Very weak diversification

The 3 months correlation between HUMANA and Outokumpu is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Outokumpu Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outokumpu Oyj ADR 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 Outokumpu Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outokumpu Oyj ADR has no effect on the direction of HUMANA i.e., HUMANA and Outokumpu Oyj go up and down completely randomly.

Pair Corralation between HUMANA and Outokumpu Oyj

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Outokumpu Oyj. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.81 times less risky than Outokumpu Oyj. The bond trades about -0.16 of its potential returns per unit of risk. The Outokumpu Oyj ADR is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  184.00  in Outokumpu Oyj ADR on September 13, 2024 and sell it today you would lose (13.00) from holding Outokumpu Oyj ADR or give up 7.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

HUMANA INC  vs.  Outokumpu Oyj ADR

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 inconsistent 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.

Outokumpu Oyj ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Outokumpu Oyj ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with HUMANA and Outokumpu Oyj

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

The idea behind HUMANA INC and Outokumpu Oyj ADR 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.