Correlation Between Arrow Electronics and HUMANA

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

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

Diversification Opportunities for Arrow Electronics and HUMANA

0.09

Correlation Coefficient

Arrow Electronics  HUMANA

Significant diversification

The 3 months correlation between Arrow and HUMANA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Arrow Electronics 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 Arrow Electronics 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 Arrow Electronics i.e., Arrow Electronics and HUMANA go up and down completely randomly.

Pair Corralation between Arrow Electronics and HUMANA

Considering the 90-day investment horizon Arrow Electronics is expected to generate 1.27 times more return on investment than HUMANA. However, Arrow Electronics is 1.27 times more volatile than HUMANA INC. It trades about -0.06 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.2 per unit of risk. If you would invest  11,695  in Arrow Electronics on September 22, 2024 and sell it today you would lose (220.00) from holding Arrow Electronics or give up 1.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Arrow Electronics  vs.  HUMANA INC

Arrow Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Electronics 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 latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated 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. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HUMANA INC investors.

Pair Trading with Arrow Electronics and HUMANA

The main advantage of trading using opposite Arrow Electronics and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics 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 Arrow Electronics 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.