Correlation Between Toyota and Humana
Can any of the company-specific risk be diversified away by investing in both Toyota 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 Toyota and Humana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toyota Motor Corp and Humana Inc, you can compare the effects of market volatilities on Toyota 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 Toyota with a short position of Humana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Humana.
Diversification Opportunities for Toyota and Humana
Average diversification
The 3 months correlation between Toyota and Humana is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and Toyota 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 Toyota Motor Corp 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 Toyota i.e., Toyota and Humana go up and down completely randomly.
Pair Corralation between Toyota and Humana
Assuming the 90 days trading horizon Toyota is expected to generate 398.82 times less return on investment than Humana. But when comparing it to its historical volatility, Toyota Motor Corp is 2.67 times less risky than Humana. It trades about 0.0 of its potential returns per unit of risk. Humana Inc is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 25,837 in Humana Inc on August 30, 2024 and sell it today you would earn a total of 3,871 from holding Humana Inc or generate 14.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toyota Motor Corp vs. Humana Inc
Performance |
| Timeline |
| Toyota Motor Corp |
| Humana Inc |
Toyota and Humana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Humana
The main advantage of trading using opposite Toyota and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota 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 Toyota Motor Corp 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. Lendinvest PLC | Humana vs. Neometals | Humana vs. Albion Technology General | Humana vs. Jupiter Fund Management |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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