Correlation Between Europacific Growth and HUMANA

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

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

Diversification Opportunities for Europacific Growth and HUMANA

0.64

Correlation Coefficient

Europacific Growth  HUMANA

Poor diversification

The 3 months correlation between Europacific and HUMANA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Europacific Growth Fund and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Europacific Growth 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 Europacific Growth Fund 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 Europacific Growth i.e., Europacific Growth and HUMANA go up and down completely randomly.

Pair Corralation between Europacific Growth and HUMANA

Assuming the 90 days horizon Europacific Growth Fund is expected to generate 1.07 times more return on investment than HUMANA. However, Europacific Growth is 1.07 times more volatile than HUMANA INC. It trades about 0.0 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.07 per unit of risk. If you would invest  5,762  in Europacific Growth Fund on November 29, 2024 and sell it today you would earn a total of  1.00  from holding Europacific Growth Fund or generate 0.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Europacific Growth Fund  vs.  HUMANA INC

Europacific Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Europacific Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Europacific Growth 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

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Europacific Growth and HUMANA

The main advantage of trading using opposite Europacific Growth and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europacific Growth 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 Europacific Growth Fund 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.