Correlation Between HUMANA and Power REIT

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

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

Diversification Opportunities for HUMANA and Power REIT

0.52

Correlation Coefficient

HUMANA  Power REIT

Very weak diversification

The 3 months correlation between HUMANA and Power is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Power REIT PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT PFD 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 Power REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power REIT PFD has no effect on the direction of HUMANA i.e., HUMANA and Power REIT go up and down completely randomly.

Pair Corralation between HUMANA and Power REIT

Assuming the 90 days trading horizon HUMANA is expected to generate 17.25 times less return on investment than Power REIT. But when comparing it to its historical volatility, HUMANA INC is 11.9 times less risky than Power REIT. It trades about 0.07 of its potential returns per unit of risk. Power REIT PFD is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  360.00  in Power REIT PFD on December 24, 2024 and sell it today you would earn a total of  132.00  from holding Power REIT PFD or generate 36.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.32%
Values	Daily Returns

HUMANA INC  vs.  Power REIT PFD

HUMANA INC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 5 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Power REIT PFD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT PFD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Power REIT sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Power REIT

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

The idea behind HUMANA INC and Power REIT PFD 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.