Correlation Between Park Ohio and HUMANA

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

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

Diversification Opportunities for Park Ohio and HUMANA

-0.41

Correlation Coefficient

Park Ohio  HUMANA

Very good diversification

The 3 months correlation between Park and HUMANA is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Park Ohio Holdings 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 Park Ohio 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 Park Ohio Holdings 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 Park Ohio i.e., Park Ohio and HUMANA go up and down completely randomly.

Pair Corralation between Park Ohio and HUMANA

Given the investment horizon of 90 days Park Ohio Holdings is expected to generate 2.37 times more return on investment than HUMANA. However, Park Ohio is 2.37 times more volatile than HUMANA INC 48. It trades about 0.05 of its potential returns per unit of risk. HUMANA INC 48 is currently generating about -0.22 per unit of risk. If you would invest  2,874  in Park Ohio Holdings on September 14, 2024 and sell it today you would earn a total of  193.00  from holding Park Ohio Holdings or generate 6.72% return on investment over 90 days.

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

Park Ohio Holdings  vs.  HUMANA INC 48

Park Ohio Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Ohio Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Park Ohio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for HUMANA INC 48 investors.

Pair Trading with Park Ohio and HUMANA

The main advantage of trading using opposite Park Ohio and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Ohio 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 Park Ohio Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.