Correlation Between HUMANA and Taylor Wimpey

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

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

Diversification Opportunities for HUMANA and Taylor Wimpey

0.46

Correlation Coefficient

HUMANA  Taylor Wimpey

Very weak diversification

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

Pair Corralation between HUMANA and Taylor Wimpey

Assuming the 90 days trading horizon HUMANA INC is expected to generate 15.27 times more return on investment than Taylor Wimpey. However, HUMANA is 15.27 times more volatile than Taylor Wimpey plc. It trades about 0.07 of its potential returns per unit of risk. Taylor Wimpey plc is currently generating about 0.04 per unit of risk. If you would invest  8,074  in HUMANA INC on September 3, 2024 and sell it today you would lose (39.00) from holding HUMANA INC or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	67.03%
Values	Daily Returns

HUMANA INC  vs.  Taylor Wimpey plc

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 somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Taylor Wimpey plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taylor Wimpey plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with HUMANA and Taylor Wimpey

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

The idea behind HUMANA INC and Taylor Wimpey plc 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.