Correlation Between HUMANA and American Beacon

Can any of the company-specific risk be diversified away by investing in both HUMANA and American Beacon 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 Beacon 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 Beacon Stephens, you can compare the effects of market volatilities on HUMANA and American Beacon 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 Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and American Beacon.

Diversification Opportunities for HUMANA and American Beacon

-0.46

Correlation Coefficient

HUMANA  American Beacon

Very good diversification

The 3 months correlation between HUMANA and American is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and American Beacon Stephens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Stephens 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 Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Stephens has no effect on the direction of HUMANA i.e., HUMANA and American Beacon go up and down completely randomly.

Pair Corralation between HUMANA and American Beacon

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the American Beacon. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.13 times less risky than American Beacon. The bond trades about -0.16 of its potential returns per unit of risk. The American Beacon Stephens is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,244  in American Beacon Stephens on September 13, 2024 and sell it today you would earn a total of  115.00  from holding American Beacon Stephens or generate 9.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

HUMANA INC  vs.  American Beacon Stephens

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.

American Beacon Stephens

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Stephens are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Beacon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HUMANA and American Beacon

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

The idea behind HUMANA INC and American Beacon Stephens 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.