Correlation Between American Equity and Humana
Can any of the company-specific risk be diversified away by investing in both American Equity and Humana 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 American Equity and Humana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Equity Investment and Humana Inc, you can compare the effects of market volatilities on American Equity and Humana 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 American Equity with a short position of Humana. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Equity and Humana.
Diversification Opportunities for American Equity and Humana
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Humana is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and American Equity 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 American Equity Investment are associated (or correlated) with Humana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humana Inc has no effect on the direction of American Equity i.e., American Equity and Humana go up and down completely randomly.
Pair Corralation between American Equity and Humana
Considering the 90-day investment horizon American Equity Investment is expected to generate 0.17 times more return on investment than Humana. However, American Equity Investment is 6.01 times less risky than Humana. It trades about 0.09 of its potential returns per unit of risk. Humana Inc is currently generating about -0.07 per unit of risk. If you would invest 5,313 in American Equity Investment on January 24, 2024 and sell it today you would earn a total of 312.00 from holding American Equity Investment or generate 5.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Equity Investment vs. Humana Inc
Performance |
| Timeline |
| American Equity Inve |
| Humana Inc |
American Equity and Humana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Equity and Humana
The main advantage of trading using opposite American Equity and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Equity position performs unexpectedly, Humana 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 Humana will offset losses from the drop in Humana's long position.The idea behind American Equity Investment and Humana Inc 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.| Humana vs. Cigna Corp | Humana vs. Definitive Healthcare Corp | Humana vs. Edwards Lifesciences Corp | Humana vs. Guardant Health |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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