Correlation Between HUMANA and Tri-ContinentalPFD

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

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

Diversification Opportunities for HUMANA and Tri-ContinentalPFD

0.23

Correlation Coefficient

HUMANA  Tri-ContinentalPFD

Modest diversification

The 3 months correlation between HUMANA and Tri-ContinentalPFD is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Tri Continental PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Continental 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 Tri-ContinentalPFD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Continental PFD has no effect on the direction of HUMANA i.e., HUMANA and Tri-ContinentalPFD go up and down completely randomly.

Pair Corralation between HUMANA and Tri-ContinentalPFD

Assuming the 90 days trading horizon HUMANA INC is expected to generate 95.58 times more return on investment than Tri-ContinentalPFD. However, HUMANA is 95.58 times more volatile than Tri Continental PFD. It trades about 0.07 of its potential returns per unit of risk. Tri Continental PFD is currently generating about 0.01 per unit of risk. If you would invest  7,911  in HUMANA INC on October 5, 2024 and sell it today you would earn a total of  533.00  from holding HUMANA INC or generate 6.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

HUMANA INC  vs.  Tri Continental PFD

HUMANA INC

Risk-Adjusted Performance

4 of 100

Very Weak

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.

Tri Continental PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Continental PFD has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tri-ContinentalPFD is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with HUMANA and Tri-ContinentalPFD

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

The idea behind HUMANA INC and Tri Continental 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.