Correlation Between GE Aerospace and HUMANA

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

By analyzing existing cross correlation between GE Aerospace and HUMANA INC, you can compare the effects of market volatilities on GE Aerospace 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 GE Aerospace with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and HUMANA.

Diversification Opportunities for GE Aerospace and HUMANA

-0.27

Correlation Coefficient

GE Aerospace  HUMANA

Very good diversification

The 3 months correlation between GE Aerospace and HUMANA is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and GE Aerospace 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 GE Aerospace 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 GE Aerospace i.e., GE Aerospace and HUMANA go up and down completely randomly.

Pair Corralation between GE Aerospace and HUMANA

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 22.97 times less return on investment than HUMANA. But when comparing it to its historical volatility, GE Aerospace is 45.5 times less risky than HUMANA. It trades about 0.15 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  8,183  in HUMANA INC on January 25, 2024 and sell it today you would lose (87.00) from holding HUMANA INC or give up 1.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.09%
Values	Daily Returns

GE Aerospace  vs.  HUMANA INC

GE Aerospace

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

HUMANA INC

Risk-Adjusted Performance

1 of 100

Modest

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.

Pair Trading with GE Aerospace and HUMANA

The main advantage of trading using opposite GE Aerospace and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace 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 GE Aerospace 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.