Correlation Between HUMANA and Seven Arts

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

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

Diversification Opportunities for HUMANA and Seven Arts

0.25

Correlation Coefficient

HUMANA  Seven Arts

Modest diversification

The 3 months correlation between HUMANA and Seven is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Seven Arts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven Arts Entertainment 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 Seven Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven Arts Entertainment has no effect on the direction of HUMANA i.e., HUMANA and Seven Arts go up and down completely randomly.

Pair Corralation between HUMANA and Seven Arts

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Seven Arts. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 22.05 times less risky than Seven Arts. The bond trades about -0.18 of its potential returns per unit of risk. The Seven Arts Entertainment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.04  in Seven Arts Entertainment on September 13, 2024 and sell it today you would lose (0.01) from holding Seven Arts Entertainment or give up 25.0% of portfolio value over 90 days.

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

HUMANA INC  vs.  Seven Arts Entertainment

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.

Seven Arts Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seven Arts Entertainment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Seven Arts showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Seven Arts

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

The idea behind HUMANA INC and Seven Arts Entertainment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.