Correlation Between HUMANA and VanEck Africa

Can any of the company-specific risk be diversified away by investing in both HUMANA and VanEck Africa 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 VanEck Africa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HUMANA INC and VanEck Africa Index, you can compare the effects of market volatilities on HUMANA and VanEck Africa 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 VanEck Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and VanEck Africa.

Diversification Opportunities for HUMANA and VanEck Africa

-0.15

Correlation Coefficient

HUMANA  VanEck Africa

Good diversification

The 3 months correlation between HUMANA and VanEck is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and VanEck Africa Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Africa Index 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 VanEck Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Africa Index has no effect on the direction of HUMANA i.e., HUMANA and VanEck Africa go up and down completely randomly.

Pair Corralation between HUMANA and VanEck Africa

Assuming the 90 days trading horizon HUMANA is expected to generate 11.93 times less return on investment than VanEck Africa. But when comparing it to its historical volatility, HUMANA INC is 1.14 times less risky than VanEck Africa. It trades about 0.01 of its potential returns per unit of risk. VanEck Africa Index is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,394  in VanEck Africa Index on March 14, 2024 and sell it today you would earn a total of  150.00  from holding VanEck Africa Index or generate 10.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

HUMANA INC  vs.  VanEck Africa Index

HUMANA INC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

VanEck Africa Index

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Africa Index are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, VanEck Africa may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with HUMANA and VanEck Africa

The main advantage of trading using opposite HUMANA and VanEck Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, VanEck Africa 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 VanEck Africa will offset losses from the drop in VanEck Africa's long position.

The idea behind HUMANA INC and VanEck Africa Index 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.