Correlation Between Humana and Clover Health

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

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

Diversification Opportunities for Humana and Clover Health

-0.85

Correlation Coefficient

Humana  Clover Health

Pay attention - limited upside

The 3 months correlation between Humana and Clover is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Clover Health Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clover Health Investments 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 Clover Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clover Health Investments has no effect on the direction of Humana i.e., Humana and Clover Health go up and down completely randomly.

Pair Corralation between Humana and Clover Health

Considering the 90-day investment horizon Humana Inc is expected to generate 0.72 times more return on investment than Clover Health. However, Humana Inc is 1.4 times less risky than Clover Health. It trades about 0.19 of its potential returns per unit of risk. Clover Health Investments is currently generating about -0.08 per unit of risk. If you would invest  24,003  in Humana Inc on September 4, 2024 and sell it today you would earn a total of  5,310  from holding Humana Inc or generate 22.12% return on investment over 90 days.

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

Humana Inc  vs.  Clover Health Investments

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.

Clover Health Investments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Health Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Clover Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Humana and Clover Health

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

The idea behind Humana Inc and Clover Health Investments 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.