Correlation Between HUMANA and Li Ning

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

Diversification Opportunities for HUMANA and Li Ning

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between HUMANA and LNNGY is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Li Ning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning 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 Li Ning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Ning has no effect on the direction of HUMANA i.e., HUMANA and Li Ning go up and down completely randomly.

Pair Corralation between HUMANA and Li Ning

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Li Ning. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 3.19 times less risky than Li Ning. The bond trades about -0.21 of its potential returns per unit of risk. The Li Ning Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,112  in Li Ning Co on August 31, 2024 and sell it today you would earn a total of  34.00  from holding Li Ning Co or generate 0.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

HUMANA INC  vs.  Li Ning Co

 Performance 
       Timeline  
HUMANA INC 

Risk-Adjusted Performance

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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 latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HUMANA INC investors.
Li Ning 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Li Ning showed solid returns over the last few months and may actually be approaching a breakup point.

HUMANA and Li Ning Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HUMANA and Li Ning

The main advantage of trading using opposite HUMANA and Li Ning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, Li Ning 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 Li Ning will offset losses from the drop in Li Ning's long position.
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The idea behind HUMANA INC and Li Ning Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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