Correlation Between Elevance Health and Humana
Can any of the company-specific risk be diversified away by investing in both Elevance Health 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 Elevance Health and Humana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elevance Health and Humana Inc, you can compare the effects of market volatilities on Elevance Health 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 Elevance Health with a short position of Humana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elevance Health and Humana.
Diversification Opportunities for Elevance Health and Humana
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Elevance and Humana is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Elevance Health and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and Elevance Health 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 Elevance Health 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 Elevance Health i.e., Elevance Health and Humana go up and down completely randomly.
Pair Corralation between Elevance Health and Humana
Considering the 90-day investment horizon Elevance Health is expected to under-perform the Humana. But the stock apears to be less risky and, when comparing its historical volatility, Elevance Health is 1.71 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 -0.07 of returns per unit of risk over similar time horizon. If you would invest 35,192 in Humana Inc on August 23, 2024 and sell it today you would lose (5,621) from holding Humana Inc or give up 15.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elevance Health vs. Humana Inc
Performance |
| Timeline |
| Elevance Health |
| Humana Inc |
Elevance Health and Humana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elevance Health and Humana
The main advantage of trading using opposite Elevance Health and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elevance Health 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.| Elevance Health vs. Cigna Corp | Elevance Health vs. UnitedHealth Group Incorporated | Elevance Health vs. Centene Corp | Elevance Health vs. Molina Healthcare |
| Humana vs. Elevance Health | Humana vs. Centene Corp | Humana vs. UnitedHealth Group Incorporated | Humana vs. CVS Health Corp |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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