Correlation Between Humana and ALPSSmith Balanced

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

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

Diversification Opportunities for Humana and ALPSSmith Balanced

0.53

Correlation Coefficient

Humana  ALPSSmith Balanced

Very weak diversification

The 3 months correlation between Humana and ALPSSmith is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and ALPSSmith Balanced Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPSSmith Balanced and Humana 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 Humana Inc are associated (or correlated) with ALPSSmith Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPSSmith Balanced has no effect on the direction of Humana i.e., Humana and ALPSSmith Balanced go up and down completely randomly.

Pair Corralation between Humana and ALPSSmith Balanced

Considering the 90-day investment horizon Humana Inc is expected to under-perform the ALPSSmith Balanced. In addition to that, Humana is 1.98 times more volatile than ALPSSmith Balanced Opportunity. It trades about -0.09 of its total potential returns per unit of risk. ALPSSmith Balanced Opportunity is currently generating about -0.07 per unit of volatility. If you would invest  1,342  in ALPSSmith Balanced Opportunity on November 20, 2024 and sell it today you would lose (77.00) from holding ALPSSmith Balanced Opportunity or give up 5.74% of portfolio value over 90 days.

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

Humana Inc  vs.  ALPSSmith Balanced Opportunity

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. In spite of abnormal performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

ALPSSmith Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALPSSmith Balanced Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, ALPSSmith Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Humana and ALPSSmith Balanced

The main advantage of trading using opposite Humana and ALPSSmith Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Humana position performs unexpectedly, ALPSSmith Balanced 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 ALPSSmith Balanced will offset losses from the drop in ALPSSmith Balanced's long position.

The idea behind Humana Inc and ALPSSmith Balanced Opportunity 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.