Correlation Between HUMANA and Fidelity Freedom

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

By analyzing existing cross correlation between HUMANA INC and Fidelity Freedom 2035, you can compare the effects of market volatilities on HUMANA and Fidelity Freedom 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 Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and Fidelity Freedom.

Diversification Opportunities for HUMANA and Fidelity Freedom

0.67

Correlation Coefficient

HUMANA  Fidelity Freedom

Poor diversification

The 3 months correlation between HUMANA and Fidelity is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Fidelity Freedom 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2035 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 Fidelity Freedom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Freedom 2035 has no effect on the direction of HUMANA i.e., HUMANA and Fidelity Freedom go up and down completely randomly.

Pair Corralation between HUMANA and Fidelity Freedom

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Fidelity Freedom. In addition to that, HUMANA is 1.34 times more volatile than Fidelity Freedom 2035. It trades about -0.06 of its total potential returns per unit of risk. Fidelity Freedom 2035 is currently generating about -0.02 per unit of volatility. If you would invest  1,634  in Fidelity Freedom 2035 on December 3, 2024 and sell it today you would lose (13.00) from holding Fidelity Freedom 2035 or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

HUMANA INC  vs.  Fidelity Freedom 2035

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.

Fidelity Freedom 2035

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Freedom 2035 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Fidelity Freedom 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 Fidelity Freedom

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

The idea behind HUMANA INC and Fidelity Freedom 2035 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.