Correlation Between HUMANA and Major Drilling

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

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

Diversification Opportunities for HUMANA and Major Drilling

-0.13

Correlation Coefficient

HUMANA  Major Drilling

Good diversification

The 3 months correlation between HUMANA and Major is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group 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 Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of HUMANA i.e., HUMANA and Major Drilling go up and down completely randomly.

Pair Corralation between HUMANA and Major Drilling

Assuming the 90 days trading horizon HUMANA INC is expected to generate 30.65 times more return on investment than Major Drilling. However, HUMANA is 30.65 times more volatile than Major Drilling Group. It trades about 0.07 of its potential returns per unit of risk. Major Drilling Group is currently generating about 0.0 per unit of risk. If you would invest  8,275  in HUMANA INC on February 21, 2024 and sell it today you would lose (317.00) from holding HUMANA INC or give up 3.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.52%
Values	Daily Returns

HUMANA INC  vs.  Major Drilling Group

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.

Major Drilling Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Major Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Major Drilling

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

The idea behind HUMANA INC and Major Drilling Group 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.