Correlation Between HUMANA and Pimco California

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

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

Diversification Opportunities for HUMANA and Pimco California

0.5

Correlation Coefficient

HUMANA  Pimco California

Very weak diversification

The 3 months correlation between HUMANA and Pimco is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Pimco California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco California Mun 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 Pimco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco California Mun has no effect on the direction of HUMANA i.e., HUMANA and Pimco California go up and down completely randomly.

Pair Corralation between HUMANA and Pimco California

Assuming the 90 days trading horizon HUMANA INC is expected to generate 1.12 times more return on investment than Pimco California. However, HUMANA is 1.12 times more volatile than Pimco California Municipal. It trades about 0.06 of its potential returns per unit of risk. Pimco California Municipal is currently generating about 0.0 per unit of risk. If you would invest  7,982  in HUMANA INC on December 31, 2024 and sell it today you would earn a total of  215.00  from holding HUMANA INC or generate 2.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

HUMANA INC  vs.  Pimco California Municipal

HUMANA INC

Risk-Adjusted Performance

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pimco California Mun

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco California Municipal has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent fundamental indicators, Pimco California is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with HUMANA and Pimco California

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

The idea behind HUMANA INC and Pimco California Municipal 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.