Correlation Between HUMANA and Orica
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By analyzing existing cross correlation between HUMANA INC and Orica Limited, you can compare the effects of market volatilities on HUMANA and Orica 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 Orica. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and Orica.
Diversification Opportunities for HUMANA and Orica
Poor diversification
The 3 months correlation between HUMANA and Orica is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Orica Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Limited 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 Orica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orica Limited has no effect on the direction of HUMANA i.e., HUMANA and Orica go up and down completely randomly.
Pair Corralation between HUMANA and Orica
Assuming the 90 days trading horizon HUMANA is expected to generate 7.76 times less return on investment than Orica. But when comparing it to its historical volatility, HUMANA INC is 3.65 times less risky than Orica. It trades about 0.02 of its potential returns per unit of risk. Orica Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 940.00 in Orica Limited on August 29, 2024 and sell it today you would earn a total of 120.00 from holding Orica Limited or generate 12.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 46.86% |
| Values | Daily Returns |
HUMANA INC vs. Orica Limited
Performance |
| Timeline |
| HUMANA INC |
| Orica Limited |
HUMANA and Orica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HUMANA and Orica
The main advantage of trading using opposite HUMANA and Orica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, Orica 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 Orica will offset losses from the drop in Orica's long position.The idea behind HUMANA INC and Orica Limited 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.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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