Correlation Between Tandem Diabetes and HUMANA

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

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

Diversification Opportunities for Tandem Diabetes and HUMANA

-0.23

Correlation Coefficient

Tandem Diabetes  HUMANA

Very good diversification

The 3 months correlation between Tandem and HUMANA is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Tandem Diabetes 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 Tandem Diabetes Care 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 Tandem Diabetes i.e., Tandem Diabetes and HUMANA go up and down completely randomly.

Pair Corralation between Tandem Diabetes and HUMANA

Given the investment horizon of 90 days Tandem Diabetes is expected to generate 101.35 times less return on investment than HUMANA. But when comparing it to its historical volatility, Tandem Diabetes Care is 19.21 times less risky than HUMANA. It trades about 0.01 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,188  in HUMANA INC on October 23, 2024 and sell it today you would earn a total of  256.00  from holding HUMANA INC or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.95%
Values	Daily Returns

Tandem Diabetes Care  vs.  HUMANA INC

Tandem Diabetes Care

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tandem Diabetes Care are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Tandem Diabetes displayed solid returns over the last few months and may actually be approaching a breakup point.

HUMANA INC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 6 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tandem Diabetes and HUMANA

The main advantage of trading using opposite Tandem Diabetes and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandem Diabetes 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 Tandem Diabetes Care 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.