Correlation Between HUMANA and Heartland Value

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

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

Diversification Opportunities for HUMANA and Heartland Value

0.07

Correlation Coefficient

HUMANA  Heartland Value

Significant diversification

The 3 months correlation between HUMANA and Heartland is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Heartland Value Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Value Plus 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 Heartland Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Value Plus has no effect on the direction of HUMANA i.e., HUMANA and Heartland Value go up and down completely randomly.

Pair Corralation between HUMANA and Heartland Value

Assuming the 90 days trading horizon HUMANA INC is expected to generate 73.52 times more return on investment than Heartland Value. However, HUMANA is 73.52 times more volatile than Heartland Value Plus. It trades about 0.08 of its potential returns per unit of risk. Heartland Value Plus is currently generating about 0.01 per unit of risk. If you would invest  8,003  in HUMANA INC on October 5, 2024 and sell it today you would earn a total of  441.00  from holding HUMANA INC or generate 5.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.71%
Values	Daily Returns

HUMANA INC  vs.  Heartland Value Plus

HUMANA INC

Risk-Adjusted Performance

4 of 100

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.

Heartland Value Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heartland Value Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Heartland Value 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 Heartland Value

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

The idea behind HUMANA INC and Heartland Value Plus 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.