Correlation Between TMX Group and HUMANA

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

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

Diversification Opportunities for TMX Group and HUMANA

0.24

Correlation Coefficient

TMX Group  HUMANA

Modest diversification

The 3 months correlation between TMX and HUMANA is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding TMX Group Limited and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and TMX Group 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 TMX Group Limited 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 TMX Group i.e., TMX Group and HUMANA go up and down completely randomly.

Pair Corralation between TMX Group and HUMANA

Assuming the 90 days horizon TMX Group Limited is expected to generate 1.29 times more return on investment than HUMANA. However, TMX Group is 1.29 times more volatile than HUMANA INC. It trades about -0.06 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.18 per unit of risk. If you would invest  3,189  in TMX Group Limited on September 21, 2024 and sell it today you would lose (138.00) from holding TMX Group Limited or give up 4.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

TMX Group Limited  vs.  HUMANA INC

TMX Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMX Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TMX Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HUMANA INC investors.

Pair Trading with TMX Group and HUMANA

The main advantage of trading using opposite TMX Group and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMX Group 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 TMX Group Limited 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.