Correlation Between HUMANA and Davis Select

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

Diversification Opportunities for HUMANA and Davis Select

  Correlation Coefficient

Weak diversification

The 3 months correlation between HUMANA and Davis is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Davis Select International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Select Interna 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 Davis Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Select Interna has no effect on the direction of HUMANA i.e., HUMANA and Davis Select go up and down completely randomly.

Pair Corralation between HUMANA and Davis Select

Assuming the 90 days trading horizon HUMANA is expected to generate 3.68 times less return on investment than Davis Select. But when comparing it to its historical volatility, HUMANA INC is 1.54 times less risky than Davis Select. It trades about 0.04 of its potential returns per unit of risk. Davis Select International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,048  in Davis Select International on April 14, 2024 and sell it today you would earn a total of  32.00  from holding Davis Select International or generate 1.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

HUMANA INC  vs.  Davis Select International


Risk-Adjusted Performance

8 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 8 (%) 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.
Davis Select Interna 

Risk-Adjusted Performance

10 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Select International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Davis Select may actually be approaching a critical reversion point that can send shares even higher in August 2024.

HUMANA and Davis Select Volatility Contrast

   Predicted Return Density   

Pair Trading with HUMANA and Davis Select

The main advantage of trading using opposite HUMANA and Davis Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, Davis Select 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 Davis Select will offset losses from the drop in Davis Select's long position.
The idea behind HUMANA INC and Davis Select International 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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