Correlation Between HUMANA and American Pwr

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

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

Diversification Opportunities for HUMANA and American Pwr

0.33

Correlation Coefficient

HUMANA  American Pwr

Weak diversification

The 3 months correlation between HUMANA and American is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and American Pwr Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Pwr Group 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 American Pwr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Pwr Group has no effect on the direction of HUMANA i.e., HUMANA and American Pwr go up and down completely randomly.

Pair Corralation between HUMANA and American Pwr

Assuming the 90 days trading horizon HUMANA INC is expected to generate 6.07 times more return on investment than American Pwr. However, HUMANA is 6.07 times more volatile than American Pwr Group. It trades about 0.07 of its potential returns per unit of risk. American Pwr Group is currently generating about 0.04 per unit of risk. If you would invest  7,891  in HUMANA INC on September 12, 2024 and sell it today you would lose (196.00) from holding HUMANA INC or give up 2.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.01%
Values	Daily Returns

HUMANA INC  vs.  American Pwr Group

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 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.

American Pwr Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Pwr Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, American Pwr may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HUMANA and American Pwr

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

The idea behind HUMANA INC and American Pwr Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.