Correlation Between T Rowe and HUMANA

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

By analyzing existing cross correlation between T Rowe Price and HUMANA INC, you can compare the effects of market volatilities on T Rowe and HUMANA 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 T Rowe with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and HUMANA.

Diversification Opportunities for T Rowe and HUMANA

0.73

Correlation Coefficient

T Rowe  HUMANA

Poor diversification

The 3 months correlation between PREIX and HUMANA is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and T Rowe 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 T Rowe Price are associated (or correlated) with HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of T Rowe i.e., T Rowe and HUMANA go up and down completely randomly.

Pair Corralation between T Rowe and HUMANA

Assuming the 90 days horizon T Rowe Price is expected to generate 0.98 times more return on investment than HUMANA. However, T Rowe Price is 1.02 times less risky than HUMANA. It trades about 0.38 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.2 per unit of risk. If you would invest  13,184  in T Rowe Price on March 22, 2024 and sell it today you would earn a total of  1,286  from holding T Rowe Price or generate 9.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

T Rowe Price  vs.  HUMANA INC

T Rowe Price

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HUMANA INC

Risk-Adjusted Performance

4 of 100

Modest

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.

Pair Trading with T Rowe and HUMANA

The main advantage of trading using opposite T Rowe and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe position performs unexpectedly, HUMANA 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 HUMANA will offset losses from the drop in HUMANA's long position.

The idea behind T Rowe Price and HUMANA INC 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.