Correlation Between First Trust and HUMANA

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

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

Diversification Opportunities for First Trust and HUMANA

-0.04

Correlation Coefficient

First Trust  HUMANA

Good diversification

The 3 months correlation between First and HUMANA is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Mid and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and First Trust 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 First Trust Mid 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 First Trust i.e., First Trust and HUMANA go up and down completely randomly.

Pair Corralation between First Trust and HUMANA

Given the investment horizon of 90 days First Trust Mid is expected to generate 0.79 times more return on investment than HUMANA. However, First Trust Mid is 1.26 times less risky than HUMANA. It trades about 0.05 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.03 per unit of risk. If you would invest  3,165  in First Trust Mid on March 4, 2024 and sell it today you would earn a total of  88.00  from holding First Trust Mid or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

First Trust Mid  vs.  HUMANA INC

First Trust Mid

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Mid are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

HUMANA INC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 2 (%) 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 First Trust and HUMANA

The main advantage of trading using opposite First Trust and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Mid 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .