Correlation Between HUMANA and FFW

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

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

Diversification Opportunities for HUMANA and FFW

0.31

Correlation Coefficient

HUMANA  FFW

Weak diversification

The 3 months correlation between HUMANA and FFW is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and FFW Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FFW Corporation 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 FFW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FFW Corporation has no effect on the direction of HUMANA i.e., HUMANA and FFW go up and down completely randomly.

Pair Corralation between HUMANA and FFW

Assuming the 90 days trading horizon HUMANA is expected to generate 1.15 times less return on investment than FFW. In addition to that, HUMANA is 1.9 times more volatile than FFW Corporation. It trades about 0.1 of its total potential returns per unit of risk. FFW Corporation is currently generating about 0.22 per unit of volatility. If you would invest  3,903  in FFW Corporation on October 20, 2024 and sell it today you would earn a total of  97.00  from holding FFW Corporation or generate 2.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

HUMANA INC  vs.  FFW Corp.

HUMANA INC

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 1 (%) 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.

FFW Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FFW Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, FFW is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HUMANA and FFW

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

The idea behind HUMANA INC and FFW Corporation 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 Transaction History module to view history of all your transactions and understand their impact on performance.