Correlation Between HUMANA and Puma Exploration

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

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

Diversification Opportunities for HUMANA and Puma Exploration

0.16

Correlation Coefficient

HUMANA  Puma Exploration

Average diversification

The 3 months correlation between HUMANA and Puma is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Puma Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puma Exploration 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 Puma Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puma Exploration has no effect on the direction of HUMANA i.e., HUMANA and Puma Exploration go up and down completely randomly.

Pair Corralation between HUMANA and Puma Exploration

Assuming the 90 days trading horizon HUMANA is expected to generate 6.96 times less return on investment than Puma Exploration. But when comparing it to its historical volatility, HUMANA INC is 6.41 times less risky than Puma Exploration. It trades about 0.25 of its potential returns per unit of risk. Puma Exploration is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Puma Exploration on October 22, 2024 and sell it today you would earn a total of  2.00  from holding Puma Exploration or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

HUMANA INC  vs.  Puma Exploration

HUMANA INC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 6 (%) 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.

Puma Exploration

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Exploration are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Puma Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Puma Exploration

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

The idea behind HUMANA INC and Puma Exploration 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.