Correlation Between HUMANA and Swan Defined

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

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

Diversification Opportunities for HUMANA and Swan Defined

0.26

Correlation Coefficient

HUMANA  Swan Defined

Modest diversification

The 3 months correlation between HUMANA and Swan is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Swan Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Defined Risk 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 Swan Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Defined Risk has no effect on the direction of HUMANA i.e., HUMANA and Swan Defined go up and down completely randomly.

Pair Corralation between HUMANA and Swan Defined

Assuming the 90 days trading horizon HUMANA INC is expected to generate 1.41 times more return on investment than Swan Defined. However, HUMANA is 1.41 times more volatile than Swan Defined Risk. It trades about 0.09 of its potential returns per unit of risk. Swan Defined Risk is currently generating about -0.33 per unit of risk. If you would invest  8,257  in HUMANA INC on October 5, 2024 and sell it today you would earn a total of  187.00  from holding HUMANA INC or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

HUMANA INC  vs.  Swan Defined Risk

HUMANA INC

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Swan Defined Risk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swan Defined Risk are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Swan Defined is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUMANA and Swan Defined

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

The idea behind HUMANA INC and Swan Defined Risk 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.