Correlation Between Humana and ETRACS Monthly

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

By analyzing existing cross correlation between Humana Inc and ETRACS Monthly Pay, you can compare the effects of market volatilities on Humana and ETRACS Monthly 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 ETRACS Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and ETRACS Monthly.

Diversification Opportunities for Humana and ETRACS Monthly

-0.39

Correlation Coefficient

Humana  ETRACS Monthly

Very good diversification

The 3 months correlation between Humana and ETRACS is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly Pay 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 ETRACS Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of Humana i.e., Humana and ETRACS Monthly go up and down completely randomly.

Pair Corralation between Humana and ETRACS Monthly

Considering the 90-day investment horizon Humana is expected to generate 3.47 times less return on investment than ETRACS Monthly. In addition to that, Humana is 1.24 times more volatile than ETRACS Monthly Pay. It trades about 0.05 of its total potential returns per unit of risk. ETRACS Monthly Pay is currently generating about 0.2 per unit of volatility. If you would invest  1,288  in ETRACS Monthly Pay on December 28, 2024 and sell it today you would earn a total of  288.00  from holding ETRACS Monthly Pay or generate 22.36% return on investment over 90 days.

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

Humana Inc  vs.  ETRACS Monthly Pay

Humana Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Humana Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Humana is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

ETRACS Monthly Pay

Risk-Adjusted Performance

Good

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

Pair Trading with Humana and ETRACS Monthly

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

The idea behind Humana Inc and ETRACS Monthly Pay 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.