Correlation Between HUMANA and Franklin Strategic

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

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

Diversification Opportunities for HUMANA and Franklin Strategic

0.31

Correlation Coefficient

HUMANA  Franklin Strategic

Weak diversification

The 3 months correlation between HUMANA and Franklin is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Franklin Strategic Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Strategic 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 Franklin Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Strategic has no effect on the direction of HUMANA i.e., HUMANA and Franklin Strategic go up and down completely randomly.

Pair Corralation between HUMANA and Franklin Strategic

Assuming the 90 days trading horizon HUMANA INC is expected to generate 240.2 times more return on investment than Franklin Strategic. However, HUMANA is 240.2 times more volatile than Franklin Strategic Mortgage. It trades about 0.11 of its potential returns per unit of risk. Franklin Strategic Mortgage is currently generating about -0.02 per unit of risk. If you would invest  7,922  in HUMANA INC on January 24, 2024 and sell it today you would earn a total of  174.00  from holding HUMANA INC or generate 2.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.06%
Values	Daily Returns

HUMANA INC  vs.  Franklin Strategic Mortgage

HUMANA INC

Risk-Adjusted Performance

0 of 100

Modest

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

Franklin Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Strategic Mortgage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Franklin Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUMANA and Franklin Strategic

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

The idea behind HUMANA INC and Franklin Strategic Mortgage 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.