Correlation Between HUMANA and MicroSectors FANG

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

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

Diversification Opportunities for HUMANA and MicroSectors FANG

-0.06

Correlation Coefficient

HUMANA  MicroSectors FANG

Good diversification

The 3 months correlation between HUMANA and MicroSectors is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index 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 MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of HUMANA i.e., HUMANA and MicroSectors FANG go up and down completely randomly.

Pair Corralation between HUMANA and MicroSectors FANG

Assuming the 90 days trading horizon HUMANA INC is expected to generate 0.51 times more return on investment than MicroSectors FANG. However, HUMANA INC is 1.96 times less risky than MicroSectors FANG. It trades about 0.14 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about -0.27 per unit of risk. If you would invest  7,965  in HUMANA INC on January 20, 2024 and sell it today you would earn a total of  447.00  from holding HUMANA INC or generate 5.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

HUMANA INC  vs.  MicroSectors FANG Index

HUMANA INC

Risk-Adjusted Performance

4 of 100

Insignificant

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.

MicroSectors FANG Index

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MicroSectors FANG may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with HUMANA and MicroSectors FANG

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

The idea behind HUMANA INC and MicroSectors FANG 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.