Correlation Between HUMANA and Fuyao Glass

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

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

Diversification Opportunities for HUMANA and Fuyao Glass

-0.19

Correlation Coefficient

HUMANA  Fuyao Glass

Good diversification

The 3 months correlation between HUMANA and Fuyao is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Fuyao Glass Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuyao Glass Industry 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 Fuyao Glass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuyao Glass Industry has no effect on the direction of HUMANA i.e., HUMANA and Fuyao Glass go up and down completely randomly.

Pair Corralation between HUMANA and Fuyao Glass

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Fuyao Glass. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 3.95 times less risky than Fuyao Glass. The bond trades about -0.18 of its potential returns per unit of risk. The Fuyao Glass Industry is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  129.00  in Fuyao Glass Industry on September 21, 2024 and sell it today you would earn a total of  38.00  from holding Fuyao Glass Industry or generate 29.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

HUMANA INC  vs.  Fuyao Glass Industry

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.

Fuyao Glass Industry

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fuyao Glass Industry are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fuyao Glass showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Fuyao Glass

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

The idea behind HUMANA INC and Fuyao Glass Industry 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.