Correlation Between HUMANA and Wasatch Large

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

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

Diversification Opportunities for HUMANA and Wasatch Large

0.03

Correlation Coefficient

HUMANA  Wasatch Large

Significant diversification

The 3 months correlation between HUMANA and Wasatch is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Wasatch Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Large Cap 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 Wasatch Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Large Cap has no effect on the direction of HUMANA i.e., HUMANA and Wasatch Large go up and down completely randomly.

Pair Corralation between HUMANA and Wasatch Large

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Wasatch Large. In addition to that, HUMANA is 1.7 times more volatile than Wasatch Large Cap. It trades about -0.18 of its total potential returns per unit of risk. Wasatch Large Cap is currently generating about -0.05 per unit of volatility. If you would invest  1,000.00  in Wasatch Large Cap on September 12, 2024 and sell it today you would lose (16.00) from holding Wasatch Large Cap or give up 1.6% of portfolio value over 90 days.

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

HUMANA INC  vs.  Wasatch Large Cap

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 weak 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.

Wasatch Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Wasatch Large 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 Wasatch Large

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

The idea behind HUMANA INC and Wasatch Large Cap 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.