Correlation Between Western Acquisition and HUMANA

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

By analyzing existing cross correlation between Western Acquisition Ventures and HUMANA INC, you can compare the effects of market volatilities on Western Acquisition and HUMANA 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 Western Acquisition with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Acquisition and HUMANA.

Diversification Opportunities for Western Acquisition and HUMANA

0.27

Correlation Coefficient

Western Acquisition  HUMANA

Modest diversification

The 3 months correlation between Western and HUMANA is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Western Acquisition 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 Western Acquisition Ventures are associated (or correlated) with HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of Western Acquisition i.e., Western Acquisition and HUMANA go up and down completely randomly.

Pair Corralation between Western Acquisition and HUMANA

Assuming the 90 days horizon Western Acquisition Ventures is expected to generate 47.52 times more return on investment than HUMANA. However, Western Acquisition is 47.52 times more volatile than HUMANA INC. It trades about 0.06 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.01 per unit of risk. If you would invest  5.00  in Western Acquisition Ventures on October 7, 2024 and sell it today you would lose (2.00) from holding Western Acquisition Ventures or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	17.36%
Values	Daily Returns

Western Acquisition Ventures  vs.  HUMANA INC

Western Acquisition

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Western Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Acquisition and HUMANA

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

The idea behind Western Acquisition Ventures and HUMANA INC 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.