Correlation Between Humax and Settlebank

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

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

Diversification Opportunities for Humax and Settlebank

0.91

Correlation Coefficient

Humax  Settlebank

Almost no diversification

The 3 months correlation between Humax and Settlebank is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Humax Co and Settlebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Settlebank and Humax 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 Humax Co are associated (or correlated) with Settlebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Settlebank has no effect on the direction of Humax i.e., Humax and Settlebank go up and down completely randomly.

Pair Corralation between Humax and Settlebank

Assuming the 90 days trading horizon Humax Co is expected to under-perform the Settlebank. But the stock apears to be less risky and, when comparing its historical volatility, Humax Co is 1.18 times less risky than Settlebank. The stock trades about -0.31 of its potential returns per unit of risk. The Settlebank is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,687,000  in Settlebank on September 15, 2024 and sell it today you would lose (212,000) from holding Settlebank or give up 12.57% of portfolio value over 90 days.

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

Humax Co  vs.  Settlebank

Humax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humax Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Settlebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Settlebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Humax and Settlebank

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

The idea behind Humax Co and Settlebank 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.