Correlation Between Prime Meridian and HUMANA

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

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

Diversification Opportunities for Prime Meridian and HUMANA

-0.02

Correlation Coefficient

Prime Meridian  HUMANA

Good diversification

The 3 months correlation between Prime and HUMANA is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Prime Meridian Holding and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Prime Meridian 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 Prime Meridian Holding 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 Prime Meridian i.e., Prime Meridian and HUMANA go up and down completely randomly.

Pair Corralation between Prime Meridian and HUMANA

Given the investment horizon of 90 days Prime Meridian Holding is expected to generate 2.52 times more return on investment than HUMANA. However, Prime Meridian is 2.52 times more volatile than HUMANA INC. It trades about 0.02 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.06 per unit of risk. If you would invest  2,801  in Prime Meridian Holding on December 1, 2024 and sell it today you would earn a total of  49.00  from holding Prime Meridian Holding or generate 1.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Prime Meridian Holding  vs.  HUMANA INC

Prime Meridian Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Meridian Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Prime Meridian is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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. 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 Prime Meridian and HUMANA

The main advantage of trading using opposite Prime Meridian and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Meridian 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 Prime Meridian Holding 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 .