Correlation Between DaVita HealthCare and Humana

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

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

Diversification Opportunities for DaVita HealthCare and Humana

-0.04

Correlation Coefficient

DaVita HealthCare  Humana

Good diversification

The 3 months correlation between DaVita and Humana is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding DaVita HealthCare Partners and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and DaVita HealthCare 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 DaVita HealthCare Partners 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 DaVita HealthCare i.e., DaVita HealthCare and Humana go up and down completely randomly.

Pair Corralation between DaVita HealthCare and Humana

Considering the 90-day investment horizon DaVita HealthCare Partners is expected to generate 0.68 times more return on investment than Humana. However, DaVita HealthCare Partners is 1.47 times less risky than Humana. It trades about 0.07 of its potential returns per unit of risk. Humana Inc is currently generating about -0.04 per unit of risk. If you would invest  14,318  in DaVita HealthCare Partners on September 5, 2024 and sell it today you would earn a total of  2,083  from holding DaVita HealthCare Partners or generate 14.55% return on investment over 90 days.

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

DaVita HealthCare Partners  vs.  Humana Inc

DaVita HealthCare

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DaVita HealthCare Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, DaVita HealthCare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 abnormal performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with DaVita HealthCare and Humana

The main advantage of trading using opposite DaVita HealthCare and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DaVita HealthCare 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 DaVita HealthCare Partners 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.