Correlation Between HUMANA and IShares Select

Can any of the company-specific risk be diversified away by investing in both HUMANA and IShares Select 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 Select 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 Select Dividend, you can compare the effects of market volatilities on HUMANA and IShares Select 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 Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and IShares Select.

Diversification Opportunities for HUMANA and IShares Select

-0.21

Correlation Coefficient

HUMANA  IShares Select

Very good diversification

The 3 months correlation between HUMANA and IShares is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and iShares Select Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Select Dividend 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 Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Select Dividend has no effect on the direction of HUMANA i.e., HUMANA and IShares Select go up and down completely randomly.

Pair Corralation between HUMANA and IShares Select

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the IShares Select. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.51 times less risky than IShares Select. The bond trades about -0.04 of its potential returns per unit of risk. The iShares Select Dividend is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  12,015  in iShares Select Dividend on February 21, 2024 and sell it today you would earn a total of  509.99  from holding iShares Select Dividend or generate 4.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

HUMANA INC  vs.  iShares Select Dividend

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.

iShares Select Dividend

Risk-Adjusted Performance

14 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Select Dividend are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, IShares Select may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with HUMANA and IShares Select

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

The idea behind HUMANA INC and iShares Select Dividend 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 Anywhere module to track or share privately all of your investments from the convenience of any device.