Correlation Between Humana and Direxion Daily

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

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

Diversification Opportunities for Humana and Direxion Daily

-0.61

Correlation Coefficient

Humana  Direxion Daily

Excellent diversification

The 3 months correlation between Humana and Direxion is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP 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 Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily SP has no effect on the direction of Humana i.e., Humana and Direxion Daily go up and down completely randomly.

Pair Corralation between Humana and Direxion Daily

Considering the 90-day investment horizon Humana Inc is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, Humana Inc is 1.18 times less risky than Direxion Daily. The etf trades about -0.07 of its potential returns per unit of risk. The Direxion Daily SP is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,089  in Direxion Daily SP on August 30, 2024 and sell it today you would earn a total of  776.00  from holding Direxion Daily SP or generate 18.98% return on investment over 90 days.

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

Humana Inc  vs.  Direxion Daily SP

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 December 2024. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Direxion Daily SP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Humana and Direxion Daily

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

The idea behind Humana Inc and Direxion Daily SP 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.