Correlation Between HUMANA and Carvana

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

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

Diversification Opportunities for HUMANA and Carvana

-0.1

Correlation Coefficient

HUMANA  Carvana

Good diversification

The 3 months correlation between HUMANA and Carvana is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana 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 Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of HUMANA i.e., HUMANA and Carvana go up and down completely randomly.

Pair Corralation between HUMANA and Carvana

Assuming the 90 days trading horizon HUMANA INC is expected to generate 0.53 times more return on investment than Carvana. However, HUMANA INC is 1.9 times less risky than Carvana. It trades about 0.16 of its potential returns per unit of risk. Carvana Co is currently generating about -0.11 per unit of risk. If you would invest  7,955  in HUMANA INC on January 19, 2024 and sell it today you would earn a total of  457.00  from holding HUMANA INC or generate 5.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

HUMANA INC  vs.  Carvana Co

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.

Carvana

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Carvana sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Carvana

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

The idea behind HUMANA INC and Carvana Co 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.