Correlation Between Barloworld and HUMANA

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

Diversification Opportunities for Barloworld and HUMANA

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Barloworld and HUMANA is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Barloworld 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 Barloworld Ltd ADR 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 Barloworld i.e., Barloworld and HUMANA go up and down completely randomly.

Pair Corralation between Barloworld and HUMANA

Assuming the 90 days horizon Barloworld is expected to generate 8.41 times less return on investment than HUMANA. But when comparing it to its historical volatility, Barloworld Ltd ADR is 6.65 times less risky than HUMANA. It trades about 0.06 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,158  in HUMANA INC on March 27, 2024 and sell it today you would earn a total of  24.00  from holding HUMANA INC or generate 0.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy78.19%
ValuesDaily Returns

Barloworld Ltd ADR  vs.  HUMANA INC

 Performance 
       Timeline  
Barloworld ADR 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Barloworld showed solid returns over the last few months and may actually be approaching a breakup point.
HUMANA INC 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 4 (%) 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.

Barloworld and HUMANA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Barloworld and HUMANA

The main advantage of trading using opposite Barloworld and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld 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 Barloworld Ltd ADR 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.
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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