Correlation Between HUMANA and Invesco DWA

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

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

Diversification Opportunities for HUMANA and Invesco DWA

0.01

Correlation Coefficient

HUMANA  Invesco DWA

Significant diversification

The 3 months correlation between HUMANA and Invesco is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Invesco DWA Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Emerging 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Emerging has no effect on the direction of HUMANA i.e., HUMANA and Invesco DWA go up and down completely randomly.

Pair Corralation between HUMANA and Invesco DWA

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Invesco DWA. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.58 times less risky than Invesco DWA. The bond trades about -0.17 of its potential returns per unit of risk. The Invesco DWA Emerging is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,003  in Invesco DWA Emerging on September 5, 2024 and sell it today you would lose (7.00) from holding Invesco DWA Emerging or give up 0.35% of portfolio value over 90 days.

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

HUMANA INC  vs.  Invesco DWA Emerging

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 uncertain 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.

Invesco DWA Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco DWA Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Invesco DWA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HUMANA and Invesco DWA

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

The idea behind HUMANA INC and Invesco DWA Emerging 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.