Correlation Between Humana and DB Gold

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

By analyzing existing cross correlation between Humana Inc and DB Gold Double, you can compare the effects of market volatilities on Humana and DB Gold 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 DB Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and DB Gold.

Diversification Opportunities for Humana and DB Gold

-0.88

Correlation Coefficient

Humana  DB Gold

Pay attention - limited upside

The 3 months correlation between Humana and DGP is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and DB Gold Double in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Gold Double 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 DB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Gold Double has no effect on the direction of Humana i.e., Humana and DB Gold go up and down completely randomly.

Pair Corralation between Humana and DB Gold

Considering the 90-day investment horizon Humana Inc is expected to generate 0.93 times more return on investment than DB Gold. However, Humana Inc is 1.07 times less risky than DB Gold. It trades about 0.21 of its potential returns per unit of risk. DB Gold Double is currently generating about -0.1 per unit of risk. If you would invest  31,464  in Humana Inc on February 14, 2024 and sell it today you would earn a total of  2,494  from holding Humana Inc or generate 7.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Humana Inc  vs.  DB Gold Double

Humana Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humana Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Humana is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

DB Gold Double

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DB Gold Double are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, DB Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Humana and DB Gold

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

The idea behind Humana Inc and DB Gold Double 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .