Correlation Between Royce Micro and HUMANA

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

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

Diversification Opportunities for Royce Micro and HUMANA

0.48

Correlation Coefficient

Royce Micro  HUMANA

Very weak diversification

The 3 months correlation between Royce and HUMANA is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Royce Micro Cap and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Royce Micro 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 Royce Micro Cap 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 Royce Micro i.e., Royce Micro and HUMANA go up and down completely randomly.

Pair Corralation between Royce Micro and HUMANA

Considering the 90-day investment horizon Royce Micro Cap is expected to under-perform the HUMANA. In addition to that, Royce Micro is 1.27 times more volatile than HUMANA INC. It trades about -0.1 of its total potential returns per unit of risk. HUMANA INC is currently generating about -0.1 per unit of volatility. If you would invest  8,019  in HUMANA INC on November 20, 2024 and sell it today you would lose (120.00) from holding HUMANA INC or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Royce Micro Cap  vs.  HUMANA INC

Royce Micro Cap

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Micro Cap are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Royce Micro is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royce Micro and HUMANA

The main advantage of trading using opposite Royce Micro and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royce Micro 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 Royce Micro Cap 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.