Correlation Between Medicover and Humana
Can any of the company-specific risk be diversified away by investing in both Medicover and Humana 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 Medicover and Humana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medicover AB and Humana Inc, you can compare the effects of market volatilities on Medicover and Humana 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 Medicover with a short position of Humana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medicover and Humana.
Diversification Opportunities for Medicover and Humana
Average diversification
The 3 months correlation between Medicover and Humana is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Medicover AB and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and Medicover 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 Medicover AB are associated (or correlated) with Humana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humana Inc has no effect on the direction of Medicover i.e., Medicover and Humana go up and down completely randomly.
Pair Corralation between Medicover and Humana
Assuming the 90 days trading horizon Medicover AB is expected to under-perform the Humana. But the stock apears to be less risky and, when comparing its historical volatility, Medicover AB is 3.71 times less risky than Humana. The stock trades about -0.24 of its potential returns per unit of risk. The Humana Inc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 24,100 in Humana Inc on August 28, 2024 and sell it today you would earn a total of 5,200 from holding Humana Inc or generate 21.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medicover AB vs. Humana Inc
Performance |
| Timeline |
| Medicover AB |
| Humana Inc |
Medicover and Humana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medicover and Humana
The main advantage of trading using opposite Medicover and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medicover position performs unexpectedly, Humana 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 Humana will offset losses from the drop in Humana's long position.The idea behind Medicover AB and Humana Inc 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.| Humana vs. TERADATA | Humana vs. CITY OFFICE REIT | Humana vs. Hyrican Informationssysteme Aktiengesellschaft | Humana vs. Datang International Power |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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