Correlation Between HUMANA and DTF Tax

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

By analyzing existing cross correlation between HUMANA INC and DTF Tax Free, you can compare the effects of market volatilities on HUMANA and DTF Tax 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 DTF Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and DTF Tax.

Diversification Opportunities for HUMANA and DTF Tax

0.48

Correlation Coefficient

HUMANA  DTF Tax

Very weak diversification

The 3 months correlation between HUMANA and DTF is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and DTF Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTF Tax Free 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 DTF Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTF Tax Free has no effect on the direction of HUMANA i.e., HUMANA and DTF Tax go up and down completely randomly.

Pair Corralation between HUMANA and DTF Tax

Assuming the 90 days trading horizon HUMANA INC is expected to generate 2.39 times more return on investment than DTF Tax. However, HUMANA is 2.39 times more volatile than DTF Tax Free. It trades about 0.05 of its potential returns per unit of risk. DTF Tax Free is currently generating about 0.08 per unit of risk. If you would invest  7,999  in HUMANA INC on December 30, 2024 and sell it today you would earn a total of  198.00  from holding HUMANA INC or generate 2.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

HUMANA INC  vs.  DTF Tax Free

HUMANA INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 4 (%) 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.

DTF Tax Free

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DTF Tax Free are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DTF Tax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HUMANA and DTF Tax

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

The idea behind HUMANA INC and DTF Tax Free 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.