Correlation Between GAMCO Natural and HUMANA

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

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

Diversification Opportunities for GAMCO Natural and HUMANA

0.34

Correlation Coefficient

GAMCO Natural  HUMANA

Weak diversification

The 3 months correlation between GAMCO and HUMANA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Natural Resources and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and GAMCO Natural 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 GAMCO Natural Resources 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 GAMCO Natural i.e., GAMCO Natural and HUMANA go up and down completely randomly.

Pair Corralation between GAMCO Natural and HUMANA

Assuming the 90 days trading horizon GAMCO Natural Resources is expected to under-perform the HUMANA. But the preferred stock apears to be less risky and, when comparing its historical volatility, GAMCO Natural Resources is 1.19 times less risky than HUMANA. The preferred stock trades about -0.17 of its potential returns per unit of risk. The HUMANA INC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8,133  in HUMANA INC on October 21, 2024 and sell it today you would earn a total of  53.00  from holding HUMANA INC or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

GAMCO Natural Resources  vs.  HUMANA INC

GAMCO Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMCO Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HUMANA INC

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GAMCO Natural and HUMANA

The main advantage of trading using opposite GAMCO Natural and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAMCO Natural 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 GAMCO Natural Resources 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .