Correlation Between HUMANA and Vanguard Small

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

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

Diversification Opportunities for HUMANA and Vanguard Small

0.56

Correlation Coefficient

HUMANA  Vanguard Small

Very weak diversification

The 3 months correlation between HUMANA and Vanguard is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap 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 Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of HUMANA i.e., HUMANA and Vanguard Small go up and down completely randomly.

Pair Corralation between HUMANA and Vanguard Small

Assuming the 90 days trading horizon HUMANA INC is expected to generate 0.84 times more return on investment than Vanguard Small. However, HUMANA INC is 1.2 times less risky than Vanguard Small. It trades about -0.06 of its potential returns per unit of risk. Vanguard Small Cap Index is currently generating about -0.14 per unit of risk. If you would invest  8,185  in HUMANA INC on December 2, 2024 and sell it today you would lose (286.00) from holding HUMANA INC or give up 3.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

HUMANA INC  vs.  Vanguard Small Cap Index

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with HUMANA and Vanguard Small

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

The idea behind HUMANA INC and Vanguard Small Cap Index 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.