Correlation Between HUMANA and Federated Mdt

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

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

Diversification Opportunities for HUMANA and Federated Mdt

0.19

Correlation Coefficient

HUMANA  Federated Mdt

Average diversification

The 3 months correlation between HUMANA and Federated is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Federated Mdt Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt 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 Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Balanced has no effect on the direction of HUMANA i.e., HUMANA and Federated Mdt go up and down completely randomly.

Pair Corralation between HUMANA and Federated Mdt

Assuming the 90 days trading horizon HUMANA is expected to generate 1.41 times less return on investment than Federated Mdt. But when comparing it to its historical volatility, HUMANA INC is 1.19 times less risky than Federated Mdt. It trades about 0.04 of its potential returns per unit of risk. Federated Mdt Balanced is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,950  in Federated Mdt Balanced on October 5, 2024 and sell it today you would earn a total of  182.00  from holding Federated Mdt Balanced or generate 9.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.75%
Values	Daily Returns

HUMANA INC  vs.  Federated Mdt Balanced

HUMANA INC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 4 (%) 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.

Federated Mdt Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Mdt Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with HUMANA and Federated Mdt

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

The idea behind HUMANA INC and Federated Mdt 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.