Correlation Between HUMANA and Payden Absolute

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

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

Diversification Opportunities for HUMANA and Payden Absolute

-0.34

Correlation Coefficient

HUMANA  Payden Absolute

Very good diversification

The 3 months correlation between HUMANA and Payden is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Payden Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Absolute Return 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 Payden Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Absolute Return has no effect on the direction of HUMANA i.e., HUMANA and Payden Absolute go up and down completely randomly.

Pair Corralation between HUMANA and Payden Absolute

Assuming the 90 days trading horizon HUMANA INC is expected to generate 704.15 times more return on investment than Payden Absolute. However, HUMANA is 704.15 times more volatile than Payden Absolute Return. It trades about 0.07 of its potential returns per unit of risk. Payden Absolute Return is currently generating about 0.2 per unit of risk. If you would invest  8,129  in HUMANA INC on October 4, 2024 and sell it today you would earn a total of  315.00  from holding HUMANA INC or generate 3.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.55%
Values	Daily Returns

HUMANA INC  vs.  Payden Absolute Return

HUMANA INC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 3 (%) 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 new stock price disturbance, may contribute to short-term losses for the investors.

Payden Absolute Return

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Absolute Return are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Payden Absolute 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 Payden Absolute

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

The idea behind HUMANA INC and Payden Absolute Return 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.