Correlation Between Humana and IShares SP

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

By analyzing existing cross correlation between Humana Inc and iShares SP 500, you can compare the effects of market volatilities on Humana and IShares SP 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 IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and IShares SP.

Diversification Opportunities for Humana and IShares SP

-0.15

Correlation Coefficient

Humana  IShares SP

Good diversification

The 3 months correlation between Humana and IShares is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 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 IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Humana i.e., Humana and IShares SP go up and down completely randomly.

Pair Corralation between Humana and IShares SP

Considering the 90-day investment horizon Humana Inc is expected to under-perform the IShares SP. In addition to that, Humana is 1.95 times more volatile than iShares SP 500. It trades about -0.02 of its total potential returns per unit of risk. iShares SP 500 is currently generating about 0.06 per unit of volatility. If you would invest  14,463  in iShares SP 500 on February 17, 2024 and sell it today you would earn a total of  4,153  from holding iShares SP 500 or generate 28.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Humana Inc  vs.  iShares SP 500

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. In spite of very healthy basic indicators, Humana is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

iShares SP 500

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Humana and IShares SP

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

The idea behind Humana Inc and iShares SP 500 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.