Correlation Between Tenet Healthcare and Humana

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

By analyzing existing cross correlation between Tenet Healthcare and Humana Inc, you can compare the effects of market volatilities on Tenet Healthcare 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 Tenet Healthcare with a short position of Humana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenet Healthcare and Humana.

Diversification Opportunities for Tenet Healthcare and Humana

-0.64

Correlation Coefficient

Tenet Healthcare  Humana

Excellent diversification

The 3 months correlation between Tenet and Humana is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tenet Healthcare and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and Tenet Healthcare 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 Tenet Healthcare 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 Tenet Healthcare i.e., Tenet Healthcare and Humana go up and down completely randomly.

Pair Corralation between Tenet Healthcare and Humana

Considering the 90-day investment horizon Tenet Healthcare is expected to generate 0.96 times more return on investment than Humana. However, Tenet Healthcare is 1.04 times less risky than Humana. It trades about 0.16 of its potential returns per unit of risk. Humana Inc is currently generating about -0.08 per unit of risk. If you would invest  10,184  in Tenet Healthcare on July 6, 2024 and sell it today you would earn a total of  5,490  from holding Tenet Healthcare or generate 53.91% return on investment over 90 days.

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

Tenet Healthcare  vs.  Humana Inc

Tenet Healthcare

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tenet Healthcare are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Tenet Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in November 2024. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Tenet Healthcare and Humana

The main advantage of trading using opposite Tenet Healthcare and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tenet Healthcare 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 Tenet Healthcare 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.