Correlation Between Federal National and HUMANA

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

By analyzing existing cross correlation between Federal National Mortgage and HUMANA INC, you can compare the effects of market volatilities on Federal National 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 Federal National with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and HUMANA.

Diversification Opportunities for Federal National and HUMANA

-0.04

Correlation Coefficient

Federal National  HUMANA

Good diversification

The 3 months correlation between Federal and HUMANA is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Federal National 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 Federal National Mortgage 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 Federal National i.e., Federal National and HUMANA go up and down completely randomly.

Pair Corralation between Federal National and HUMANA

Given the investment horizon of 90 days Federal National Mortgage is expected to generate 11.41 times more return on investment than HUMANA. However, Federal National is 11.41 times more volatile than HUMANA INC. It trades about 0.2 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.06 per unit of risk. If you would invest  257.00  in Federal National Mortgage on December 2, 2024 and sell it today you would earn a total of  383.00  from holding Federal National Mortgage or generate 149.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Federal National Mortgage  vs.  HUMANA INC

Federal National Mortgage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting primary indicators, Federal National sustained solid returns over the last few months and may actually be approaching a breakup point.

HUMANA INC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Federal National and HUMANA

The main advantage of trading using opposite Federal National and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National 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 Federal National Mortgage 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.