Correlation Between OMX Stockholm and Humana AB

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

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

Diversification Opportunities for OMX Stockholm and Humana AB

-0.25

Correlation Coefficient

OMX Stockholm  Humana AB

Very good diversification

The 3 months correlation between OMX and Humana is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding OMX Stockholm Mid and Humana AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana AB and OMX Stockholm 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 OMX Stockholm Mid are associated (or correlated) with Humana AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humana AB has no effect on the direction of OMX Stockholm i.e., OMX Stockholm and Humana AB go up and down completely randomly.

Pair Corralation between OMX Stockholm and Humana AB

Assuming the 90 days trading horizon OMX Stockholm Mid is expected to under-perform the Humana AB. But the index apears to be less risky and, when comparing its historical volatility, OMX Stockholm Mid is 2.9 times less risky than Humana AB. The index trades about -0.03 of its potential returns per unit of risk. The Humana AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,180  in Humana AB on September 14, 2024 and sell it today you would earn a total of  460.00  from holding Humana AB or generate 14.47% return on investment over 90 days.

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

OMX Stockholm Mid  vs.  Humana AB

Pair Trading with OMX Stockholm and Humana AB

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

The idea behind OMX Stockholm Mid and Humana AB 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.