Correlation Between Needham Aggressive and HUMANA

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

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

Diversification Opportunities for Needham Aggressive and HUMANA

-0.31

Correlation Coefficient

Needham Aggressive  HUMANA

Very good diversification

The 3 months correlation between Needham and HUMANA is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Needham Aggressive 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 Needham Aggressive Growth 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 Needham Aggressive i.e., Needham Aggressive and HUMANA go up and down completely randomly.

Pair Corralation between Needham Aggressive and HUMANA

Assuming the 90 days horizon Needham Aggressive Growth is expected to under-perform the HUMANA. In addition to that, Needham Aggressive is 2.31 times more volatile than HUMANA INC. It trades about -0.08 of its total potential returns per unit of risk. HUMANA INC is currently generating about 0.05 per unit of volatility. If you would invest  7,999  in HUMANA INC on December 29, 2024 and sell it today you would earn a total of  198.00  from holding HUMANA INC or generate 2.48% return on investment over 90 days.

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

Needham Aggressive Growth  vs.  HUMANA INC

Needham Aggressive Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Needham Aggressive Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

HUMANA INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 4 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Needham Aggressive and HUMANA

The main advantage of trading using opposite Needham Aggressive and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Aggressive 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 Needham Aggressive Growth 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.