Correlation Between Hershey and Humana

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

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

Diversification Opportunities for Hershey and Humana

0.19

Correlation Coefficient

Hershey  Humana

Average diversification

The 3 months correlation between Hershey and Humana is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and Hershey 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 Hershey Co 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 Hershey i.e., Hershey and Humana go up and down completely randomly.

Pair Corralation between Hershey and Humana

Assuming the 90 days trading horizon Hershey Co is expected to generate 1.08 times more return on investment than Humana. However, Hershey is 1.08 times more volatile than Humana Inc. It trades about 0.08 of its potential returns per unit of risk. Humana Inc is currently generating about -0.2 per unit of risk. If you would invest  17,037  in Hershey Co on September 18, 2024 and sell it today you would earn a total of  821.00  from holding Hershey Co or generate 4.82% return on investment over 90 days.

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

Hershey Co  vs.  Humana Inc

Hershey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hershey Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hershey and Humana

The main advantage of trading using opposite Hershey and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey 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 Hershey Co 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.