Correlation Between HUMANA and Live Oak

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

Diversification Opportunities for HUMANA and Live Oak

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between HUMANA and Live is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Live Oak Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Oak Health 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 Live Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Oak Health has no effect on the direction of HUMANA i.e., HUMANA and Live Oak go up and down completely randomly.

Pair Corralation between HUMANA and Live Oak

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Live Oak. In addition to that, HUMANA is 1.52 times more volatile than Live Oak Health. It trades about -0.16 of its total potential returns per unit of risk. Live Oak Health is currently generating about 0.1 per unit of volatility. If you would invest  2,168  in Live Oak Health on September 1, 2024 and sell it today you would earn a total of  44.00  from holding Live Oak Health or generate 2.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

HUMANA INC  vs.  Live Oak Health

 Performance 
       Timeline  
HUMANA INC 

Risk-Adjusted Performance

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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 latest conflicting 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.
Live Oak Health 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Live Oak Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Live Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HUMANA and Live Oak Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HUMANA and Live Oak

The main advantage of trading using opposite HUMANA and Live Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, Live Oak 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 Live Oak will offset losses from the drop in Live Oak's long position.
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The idea behind HUMANA INC and Live Oak Health 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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