Correlation Between HUMANA and Dodge Cox

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

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

Diversification Opportunities for HUMANA and Dodge Cox

-0.68

Correlation Coefficient

HUMANA  Dodge Cox

Excellent diversification

The 3 months correlation between HUMANA and Dodge is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Dodge Cox Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox Stock and HUMANA 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 HUMANA INC are associated (or correlated) with Dodge Cox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Cox Stock has no effect on the direction of HUMANA i.e., HUMANA and Dodge Cox go up and down completely randomly.

Pair Corralation between HUMANA and Dodge Cox

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Dodge Cox. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.37 times less risky than Dodge Cox. The bond trades about -0.06 of its potential returns per unit of risk. The Dodge Cox Stock is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  27,653  in Dodge Cox Stock on August 30, 2024 and sell it today you would earn a total of  1,058  from holding Dodge Cox Stock or generate 3.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.36%
Values	Daily Returns

HUMANA INC  vs.  Dodge Cox Stock

HUMANA INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HUMANA INC investors.

Dodge Cox Stock

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dodge Cox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUMANA and Dodge Cox

The main advantage of trading using opposite HUMANA and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, Dodge Cox 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 Dodge Cox will offset losses from the drop in Dodge Cox's long position.

The idea behind HUMANA INC and Dodge Cox Stock 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.

Check out your portfolio center.

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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.