Correlation Between Reborn Coffee and HUMANA

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

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

Diversification Opportunities for Reborn Coffee and HUMANA

0.07

Correlation Coefficient

Reborn Coffee  HUMANA

Significant diversification

The 3 months correlation between Reborn and HUMANA is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Reborn Coffee and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Reborn Coffee 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 Reborn Coffee 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 Reborn Coffee i.e., Reborn Coffee and HUMANA go up and down completely randomly.

Pair Corralation between Reborn Coffee and HUMANA

Given the investment horizon of 90 days Reborn Coffee is expected to generate 16.6 times more return on investment than HUMANA. However, Reborn Coffee is 16.6 times more volatile than HUMANA INC. It trades about 0.13 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.1 per unit of risk. If you would invest  181.00  in Reborn Coffee on February 22, 2024 and sell it today you would earn a total of  190.00  from holding Reborn Coffee or generate 104.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Reborn Coffee  vs.  HUMANA INC

Reborn Coffee

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reborn Coffee are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Reborn Coffee displayed solid returns over the last few months and may actually be approaching a breakup point.

HUMANA INC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 8 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Reborn Coffee and HUMANA

The main advantage of trading using opposite Reborn Coffee and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reborn Coffee 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 Reborn Coffee 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.