Correlation Between Humana and IShares Aerospace

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

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

Diversification Opportunities for Humana and IShares Aerospace

0.21

Correlation Coefficient

Humana  IShares Aerospace

Modest diversification

The 3 months correlation between Humana and IShares is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and iShares Aerospace Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Aerospace Defense 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 IShares Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Aerospace Defense has no effect on the direction of Humana i.e., Humana and IShares Aerospace go up and down completely randomly.

Pair Corralation between Humana and IShares Aerospace

Considering the 90-day investment horizon Humana Inc is expected to under-perform the IShares Aerospace. In addition to that, Humana is 2.42 times more volatile than iShares Aerospace Defense. It trades about -0.27 of its total potential returns per unit of risk. iShares Aerospace Defense is currently generating about -0.15 per unit of volatility. If you would invest  15,247  in iShares Aerospace Defense on September 22, 2024 and sell it today you would lose (615.00) from holding iShares Aerospace Defense or give up 4.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Humana Inc  vs.  iShares Aerospace Defense

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 abnormal performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

iShares Aerospace Defense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Aerospace Defense has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Aerospace is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Humana and IShares Aerospace

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

The idea behind Humana Inc and iShares Aerospace Defense 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.