Correlation Between HUMANA and George Putnam

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

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

Diversification Opportunities for HUMANA and George Putnam

0.23

Correlation Coefficient

HUMANA  George Putnam

Modest diversification

The 3 months correlation between HUMANA and George is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and George Putnam Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on George Putnam Balanced 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 George Putnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of George Putnam Balanced has no effect on the direction of HUMANA i.e., HUMANA and George Putnam go up and down completely randomly.

Pair Corralation between HUMANA and George Putnam

Assuming the 90 days trading horizon HUMANA INC is expected to generate 1.03 times more return on investment than George Putnam. However, HUMANA is 1.03 times more volatile than George Putnam Balanced. It trades about -0.13 of its potential returns per unit of risk. George Putnam Balanced is currently generating about -0.2 per unit of risk. If you would invest  8,180  in HUMANA INC on October 4, 2024 and sell it today you would lose (145.00) from holding HUMANA INC or give up 1.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HUMANA INC  vs.  George Putnam Balanced

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 somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

George Putnam Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days George Putnam Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, George Putnam 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 George Putnam

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

The idea behind HUMANA INC and George Putnam Balanced 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.