Correlation Between Disney and HUMANA

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

By analyzing existing cross correlation between Walt Disney and HUMANA INC 48, you can compare the effects of market volatilities on Disney 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 Disney with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and HUMANA.

Diversification Opportunities for Disney and HUMANA

-0.47

Correlation Coefficient

Disney  HUMANA

Very good diversification

The 3 months correlation between Disney and HUMANA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and HUMANA INC 48 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC 48 and Disney 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 Walt Disney 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 48 has no effect on the direction of Disney i.e., Disney and HUMANA go up and down completely randomly.

Pair Corralation between Disney and HUMANA

Considering the 90-day investment horizon Walt Disney is expected to generate 1.51 times more return on investment than HUMANA. However, Disney is 1.51 times more volatile than HUMANA INC 48. It trades about 0.27 of its potential returns per unit of risk. HUMANA INC 48 is currently generating about -0.13 per unit of risk. If you would invest  9,055  in Walt Disney on September 13, 2024 and sell it today you would earn a total of  2,406  from holding Walt Disney or generate 26.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	69.84%
Values	Daily Returns

Walt Disney  vs.  HUMANA INC 48

Walt Disney

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

HUMANA INC 48

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUMANA INC 48 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 48 investors.

Pair Trading with Disney and HUMANA

The main advantage of trading using opposite Disney and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney and HUMANA INC 48 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.