Correlation Between Hartford Balanced and HUMANA

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

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

Diversification Opportunities for Hartford Balanced and HUMANA

0.46

Correlation Coefficient

Hartford Balanced  HUMANA

Very weak diversification

The 3 months correlation between Hartford and HUMANA is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Balanced and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Hartford Balanced 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 The Hartford Balanced 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 Hartford Balanced i.e., Hartford Balanced and HUMANA go up and down completely randomly.

Pair Corralation between Hartford Balanced and HUMANA

Assuming the 90 days horizon Hartford Balanced is expected to generate 1.07 times less return on investment than HUMANA. But when comparing it to its historical volatility, The Hartford Balanced is 1.9 times less risky than HUMANA. It trades about 0.13 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,944  in HUMANA INC on December 23, 2024 and sell it today you would earn a total of  253.00  from holding HUMANA INC or generate 3.18% return on investment over 90 days.

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

The Hartford Balanced  vs.  HUMANA INC

Hartford Balanced

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Balanced are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Hartford Balanced 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 5 (%) 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hartford Balanced and HUMANA

The main advantage of trading using opposite Hartford Balanced and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hartford Balanced 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 The Hartford Balanced 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.