Correlation Between HUMANA and Fifth Third

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

Diversification Opportunities for HUMANA and Fifth Third

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between HUMANA and Fifth is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of HUMANA i.e., HUMANA and Fifth Third go up and down completely randomly.

Pair Corralation between HUMANA and Fifth Third

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Fifth Third. In addition to that, HUMANA is 1.82 times more volatile than Fifth Third Bancorp. It trades about -0.05 of its total potential returns per unit of risk. Fifth Third Bancorp is currently generating about 0.09 per unit of volatility. If you would invest  2,571  in Fifth Third Bancorp on September 3, 2024 and sell it today you would earn a total of  18.00  from holding Fifth Third Bancorp or generate 0.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy90.0%
ValuesDaily Returns

HUMANA INC  vs.  Fifth Third Bancorp

 Performance 
       Timeline  
HUMANA INC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
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 newest stock price disturbance, may contribute to short-term losses for the investors.
Fifth Third Bancorp 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Fifth Third is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

HUMANA and Fifth Third Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HUMANA and Fifth Third

The main advantage of trading using opposite HUMANA and Fifth Third positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, Fifth Third 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 Fifth Third will offset losses from the drop in Fifth Third's long position.
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The idea behind HUMANA INC and Fifth Third Bancorp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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