Correlation Between HUMANA and Tokyu Corp

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

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

Diversification Opportunities for HUMANA and Tokyu Corp

0.14

Correlation Coefficient

HUMANA  Tokyu Corp

Average diversification

The 3 months correlation between HUMANA and Tokyu is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Tokyu Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Corp ADR 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 Tokyu Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Corp ADR has no effect on the direction of HUMANA i.e., HUMANA and Tokyu Corp go up and down completely randomly.

Pair Corralation between HUMANA and Tokyu Corp

Assuming the 90 days trading horizon HUMANA INC is expected to generate 1.78 times more return on investment than Tokyu Corp. However, HUMANA is 1.78 times more volatile than Tokyu Corp ADR. It trades about 0.25 of its potential returns per unit of risk. Tokyu Corp ADR is currently generating about -0.24 per unit of risk. If you would invest  7,944  in HUMANA INC on October 23, 2024 and sell it today you would earn a total of  500.00  from holding HUMANA INC or generate 6.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

HUMANA INC  vs.  Tokyu Corp ADR

HUMANA INC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 6 (%) 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.

Tokyu Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyu Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HUMANA and Tokyu Corp

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

The idea behind HUMANA INC and Tokyu Corp ADR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.