Correlation Between Gold Fields and HUMANA

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

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

Diversification Opportunities for Gold Fields and HUMANA

-0.24

Correlation Coefficient

Gold Fields  HUMANA

Very good diversification

The 3 months correlation between Gold and HUMANA is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Gold Fields 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 Gold Fields Ltd 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 Gold Fields i.e., Gold Fields and HUMANA go up and down completely randomly.

Pair Corralation between Gold Fields and HUMANA

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 2.91 times more return on investment than HUMANA. However, Gold Fields is 2.91 times more volatile than HUMANA INC. It trades about 0.06 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.04 per unit of risk. If you would invest  1,577  in Gold Fields Ltd on January 20, 2024 and sell it today you would earn a total of  188.00  from holding Gold Fields Ltd or generate 11.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.34%
Values	Daily Returns

Gold Fields Ltd  vs.  HUMANA INC

Gold Fields

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields demonstrated solid returns over the last few months and may actually be approaching a breakup point.

HUMANA INC

Risk-Adjusted Performance

4 of 100

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.

Pair Trading with Gold Fields and HUMANA

The main advantage of trading using opposite Gold Fields and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields 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 Gold Fields Ltd 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.