Correlation Between HUMANA and Praxis Small

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

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

Diversification Opportunities for HUMANA and Praxis Small

0.01

Correlation Coefficient

HUMANA  Praxis Small

Significant diversification

The 3 months correlation between HUMANA and Praxis is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Praxis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Small 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 Praxis Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Small Cap has no effect on the direction of HUMANA i.e., HUMANA and Praxis Small go up and down completely randomly.

Pair Corralation between HUMANA and Praxis Small

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Praxis Small. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 2.01 times less risky than Praxis Small. The bond trades about -0.05 of its potential returns per unit of risk. The Praxis Small Cap is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,066  in Praxis Small Cap on October 9, 2024 and sell it today you would earn a total of  9.00  from holding Praxis Small Cap or generate 0.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

HUMANA INC  vs.  Praxis Small Cap

HUMANA INC

Risk-Adjusted Performance

0 of 100

Insignificant

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.

Praxis Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Small Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Praxis Small 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 Praxis Small

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

The idea behind HUMANA INC and Praxis Small 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.