Correlation Between Shimano and HUMANA

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

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

Diversification Opportunities for Shimano and HUMANA

0.6

Correlation Coefficient

Shimano  HUMANA

Poor diversification

The 3 months correlation between Shimano and HUMANA is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Shimano and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Shimano 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 Shimano 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 Shimano i.e., Shimano and HUMANA go up and down completely randomly.

Pair Corralation between Shimano and HUMANA

Assuming the 90 days horizon Shimano is expected to under-perform the HUMANA. In addition to that, Shimano is 4.27 times more volatile than HUMANA INC. It trades about -0.24 of its total potential returns per unit of risk. HUMANA INC is currently generating about -0.05 per unit of volatility. If you would invest  8,090  in HUMANA INC on September 4, 2024 and sell it today you would lose (55.00) from holding HUMANA INC or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Shimano  vs.  HUMANA INC

Shimano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shimano has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shimano and HUMANA

The main advantage of trading using opposite Shimano and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shimano 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 Shimano 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.