Correlation Between Option Care and HUMANA

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Can any of the company-specific risk be diversified away by investing in both Option Care 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 Option Care and HUMANA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Option Care Health and HUMANA INC, you can compare the effects of market volatilities on Option Care 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 Option Care with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Option Care and HUMANA.

Diversification Opportunities for Option Care and HUMANA

-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between Option and HUMANA is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Option Care Health and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Option Care 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 Option Care 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 Option Care i.e., Option Care and HUMANA go up and down completely randomly.

Pair Corralation between Option Care and HUMANA

Given the investment horizon of 90 days Option Care Health is expected to generate 1.97 times more return on investment than HUMANA. However, Option Care is 1.97 times more volatile than HUMANA INC. It trades about 0.28 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.09 per unit of risk. If you would invest  2,916  in Option Care Health on November 18, 2024 and sell it today you would earn a total of  230.00  from holding Option Care Health or generate 7.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Option Care Health  vs.  HUMANA INC

 Performance 
       Timeline  
Option Care Health 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Option Care Health are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Option Care demonstrated solid returns over the last few months and may actually be approaching a breakup point.
HUMANA INC 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Option Care and HUMANA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Option Care and HUMANA

The main advantage of trading using opposite Option Care and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Option Care 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.
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The idea behind Option Care Health 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.
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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