Correlation Between Franklin Real and HUMANA

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

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

Diversification Opportunities for Franklin Real and HUMANA

0.04

Correlation Coefficient

Franklin Real  HUMANA

Significant diversification

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

Pair Corralation between Franklin Real and HUMANA

Assuming the 90 days horizon Franklin Real Estate is expected to generate 1.37 times more return on investment than HUMANA. However, Franklin Real is 1.37 times more volatile than HUMANA INC. It trades about 0.07 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.09 per unit of risk. If you would invest  1,921  in Franklin Real Estate on September 3, 2024 and sell it today you would earn a total of  66.00  from holding Franklin Real Estate or generate 3.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Franklin Real Estate  vs.  HUMANA INC

Franklin Real Estate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Real Estate are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Franklin Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Real and HUMANA

The main advantage of trading using opposite Franklin Real and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Real 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 Franklin Real Estate 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.