Correlation Between HUMANA and Prime Meridian

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

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

Diversification Opportunities for HUMANA and Prime Meridian

-0.55

Correlation Coefficient

HUMANA  Prime Meridian

Excellent diversification

The 3 months correlation between HUMANA and Prime is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Prime Meridian Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Meridian Holding 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 Prime Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Meridian Holding has no effect on the direction of HUMANA i.e., HUMANA and Prime Meridian go up and down completely randomly.

Pair Corralation between HUMANA and Prime Meridian

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Prime Meridian. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.99 times less risky than Prime Meridian. The bond trades about -0.15 of its potential returns per unit of risk. The Prime Meridian Holding is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Prime Meridian Holding on September 2, 2024 and sell it today you would earn a total of  500.00  from holding Prime Meridian Holding or generate 20.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

HUMANA INC  vs.  Prime Meridian Holding

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.

Prime Meridian Holding

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Meridian Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Prime Meridian reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Prime Meridian

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

The idea behind HUMANA INC and Prime Meridian Holding 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.