Correlation Between HUMANA and Franklin Dynatech

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

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

Diversification Opportunities for HUMANA and Franklin Dynatech

-0.11

Correlation Coefficient

HUMANA  Franklin Dynatech

Good diversification

The 3 months correlation between HUMANA and Franklin is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Franklin Dynatech Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Dynatech 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 Franklin Dynatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Dynatech has no effect on the direction of HUMANA i.e., HUMANA and Franklin Dynatech go up and down completely randomly.

Pair Corralation between HUMANA and Franklin Dynatech

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Franklin Dynatech. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.71 times less risky than Franklin Dynatech. The bond trades about -0.07 of its potential returns per unit of risk. The Franklin Dynatech Fund is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  18,747  in Franklin Dynatech Fund on November 29, 2024 and sell it today you would lose (374.00) from holding Franklin Dynatech Fund or give up 1.99% of portfolio value over 90 days.

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

HUMANA INC  vs.  Franklin Dynatech Fund

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.

Franklin Dynatech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Dynatech Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Dynatech 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 Franklin Dynatech

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

The idea behind HUMANA INC and Franklin Dynatech Fund 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.