Correlation Between HUMANA and Auxico Resources

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

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

Diversification Opportunities for HUMANA and Auxico Resources

0.09

Correlation Coefficient

HUMANA  Auxico Resources

Significant diversification

The 3 months correlation between HUMANA and Auxico is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Auxico Resources Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auxico Resources Canada 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 Auxico Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auxico Resources Canada has no effect on the direction of HUMANA i.e., HUMANA and Auxico Resources go up and down completely randomly.

Pair Corralation between HUMANA and Auxico Resources

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Auxico Resources. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 93.52 times less risky than Auxico Resources. The bond trades about -0.15 of its potential returns per unit of risk. The Auxico Resources Canada is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.10  in Auxico Resources Canada on September 2, 2024 and sell it today you would lose (0.50) from holding Auxico Resources Canada or give up 45.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

HUMANA INC  vs.  Auxico Resources Canada

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.

Auxico Resources Canada

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Auxico Resources Canada are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Auxico Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Auxico Resources

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

The idea behind HUMANA INC and Auxico Resources Canada 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.