Correlation Between HUMANA and Sit International

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

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

Diversification Opportunities for HUMANA and Sit International

0.74

Correlation Coefficient

HUMANA  Sit International

Poor diversification

The 3 months correlation between HUMANA and Sit is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Sit International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit International Equity 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 Sit International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit International Equity has no effect on the direction of HUMANA i.e., HUMANA and Sit International go up and down completely randomly.

Pair Corralation between HUMANA and Sit International

Assuming the 90 days trading horizon HUMANA is expected to generate 4.05 times less return on investment than Sit International. But when comparing it to its historical volatility, HUMANA INC is 1.18 times less risky than Sit International. It trades about 0.05 of its potential returns per unit of risk. Sit International Equity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,102  in Sit International Equity on December 30, 2024 and sell it today you would earn a total of  117.00  from holding Sit International Equity or generate 10.62% return on investment over 90 days.

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

HUMANA INC  vs.  Sit International Equity

HUMANA INC

Risk-Adjusted Performance

Insignificant

Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Sit International Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sit International Equity are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Sit International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HUMANA and Sit International

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

The idea behind HUMANA INC and Sit International Equity 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.