Correlation Between HUMANA and Solvay Bank

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

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

Diversification Opportunities for HUMANA and Solvay Bank

0.46

Correlation Coefficient

HUMANA  Solvay Bank

Very weak diversification

The 3 months correlation between HUMANA and Solvay is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Solvay Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay Bank Corp 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 Solvay Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solvay Bank Corp has no effect on the direction of HUMANA i.e., HUMANA and Solvay Bank go up and down completely randomly.

Pair Corralation between HUMANA and Solvay Bank

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Solvay Bank. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.87 times less risky than Solvay Bank. The bond trades about -0.11 of its potential returns per unit of risk. The Solvay Bank Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,675  in Solvay Bank Corp on December 3, 2024 and sell it today you would earn a total of  25.00  from holding Solvay Bank Corp or generate 0.93% return on investment over 90 days.

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

HUMANA INC  vs.  Solvay Bank Corp

HUMANA INC

Risk-Adjusted Performance

Very Weak

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.

Solvay Bank Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solvay Bank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Solvay Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HUMANA and Solvay Bank

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

The idea behind HUMANA INC and Solvay Bank Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.