Correlation Between HUMANA and Allegion PLC

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Can any of the company-specific risk be diversified away by investing in both HUMANA and Allegion PLC 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 Allegion PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HUMANA INC and Allegion PLC, you can compare the effects of market volatilities on HUMANA and Allegion PLC 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 Allegion PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and Allegion PLC.

Diversification Opportunities for HUMANA and Allegion PLC

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between HUMANA and Allegion is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC 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 are associated (or correlated) with Allegion PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegion PLC has no effect on the direction of HUMANA i.e., HUMANA and Allegion PLC go up and down completely randomly.

Pair Corralation between HUMANA and Allegion PLC

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Allegion PLC. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.28 times less risky than Allegion PLC. The bond trades about -0.15 of its potential returns per unit of risk. The Allegion PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  13,654  in Allegion PLC on September 2, 2024 and sell it today you would earn a total of  430.00  from holding Allegion PLC or generate 3.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.44%
ValuesDaily Returns

HUMANA INC  vs.  Allegion PLC

 Performance 
       Timeline  
HUMANA INC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak 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.
Allegion PLC 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Allegion PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Allegion PLC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

HUMANA and Allegion PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HUMANA and Allegion PLC

The main advantage of trading using opposite HUMANA and Allegion PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, Allegion PLC 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 Allegion PLC will offset losses from the drop in Allegion PLC's long position.
The idea behind HUMANA INC and Allegion PLC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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