Correlation Between HUMANA and Europacific Growth

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

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

Diversification Opportunities for HUMANA and Europacific Growth

0.74

Correlation Coefficient

HUMANA  Europacific Growth

Poor diversification

The 3 months correlation between HUMANA and Europacific is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth 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 Europacific Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europacific Growth has no effect on the direction of HUMANA i.e., HUMANA and Europacific Growth go up and down completely randomly.

Pair Corralation between HUMANA and Europacific Growth

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Europacific Growth. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.16 times less risky than Europacific Growth. The bond trades about -0.04 of its potential returns per unit of risk. The Europacific Growth Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,482  in Europacific Growth Fund on November 20, 2024 and sell it today you would earn a total of  145.00  from holding Europacific Growth Fund or generate 2.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

HUMANA INC  vs.  Europacific Growth Fund

HUMANA INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Europacific Growth

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Europacific Growth Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Europacific Growth 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 Europacific Growth

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

The idea behind HUMANA INC and Europacific Growth Fund 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.