Correlation Between Humana and PPHE Hotel

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

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

Diversification Opportunities for Humana and PPHE Hotel

0.62

Correlation Coefficient

Humana  PPHE Hotel

Poor diversification

The 3 months correlation between Humana and PPHE is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and PPHE Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE Hotel 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 PPHE Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE Hotel Group has no effect on the direction of Humana i.e., Humana and PPHE Hotel go up and down completely randomly.

Pair Corralation between Humana and PPHE Hotel

Assuming the 90 days trading horizon Humana Inc is expected to under-perform the PPHE Hotel. In addition to that, Humana is 2.89 times more volatile than PPHE Hotel Group. It trades about -0.09 of its total potential returns per unit of risk. PPHE Hotel Group is currently generating about -0.08 per unit of volatility. If you would invest  125,780  in PPHE Hotel Group on September 4, 2024 and sell it today you would lose (7,780) from holding PPHE Hotel Group or give up 6.19% of portfolio value over 90 days.

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

Humana Inc  vs.  PPHE Hotel 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. 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.

PPHE Hotel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PPHE Hotel Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, PPHE Hotel is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Humana and PPHE Hotel

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

The idea behind Humana Inc and PPHE Hotel 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.