Correlation Between HUMANA and Empresa Distribuidora

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

By analyzing existing cross correlation between HUMANA INC 395 and Empresa Distribuidora y, you can compare the effects of market volatilities on HUMANA and Empresa Distribuidora 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 Empresa Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and Empresa Distribuidora.

Diversification Opportunities for HUMANA and Empresa Distribuidora

-0.61

Correlation Coefficient

HUMANA  Empresa Distribuidora

Excellent diversification

The 3 months correlation between HUMANA and Empresa is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC 395 and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora 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 395 are associated (or correlated) with Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of HUMANA i.e., HUMANA and Empresa Distribuidora go up and down completely randomly.

Pair Corralation between HUMANA and Empresa Distribuidora

Assuming the 90 days trading horizon HUMANA INC 395 is expected to under-perform the Empresa Distribuidora. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC 395 is 9.55 times less risky than Empresa Distribuidora. The bond trades about -0.09 of its potential returns per unit of risk. The Empresa Distribuidora y is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  2,452  in Empresa Distribuidora y on September 15, 2024 and sell it today you would earn a total of  2,471  from holding Empresa Distribuidora y or generate 100.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

HUMANA INC 395  vs.  Empresa Distribuidora y

HUMANA INC 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUMANA INC 395 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.

Empresa Distribuidora

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Distribuidora y are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Empresa Distribuidora displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Empresa Distribuidora

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

The idea behind HUMANA INC 395 and Empresa Distribuidora y 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..