# Correlation Between HUMANA and American Funds

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Can any of the company-specific risk be diversified away by investing in both HUMANA and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HUMANA INC and American Funds 2010, you can compare the effects of market volatilities on HUMANA and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and American Funds.

## Diversification Opportunities for HUMANA and American Funds

 0.17 Correlation Coefficient

### Average diversification

The 3 months correlation between HUMANA and AMERICAN is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and AMERICAN FUNDS 2010 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2010 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2010 has no effect on the direction of HUMANA i.e., HUMANA and American Funds go up and down completely randomly.

## Pair Corralation between HUMANA and American Funds

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the American Funds. In addition to that, HUMANA is 2.73 times more volatile than American Funds 2010. It trades about -0.29 of its total potential returns per unit of risk. American Funds 2010 is currently generating about 0.01 per unit of volatility. If you would invest  1,142  in American Funds 2010 on December 1, 2023 and sell it today you would earn a total of  1.00  from holding American Funds 2010 or generate 0.09% return on investment over 90 days.
 Time Period 3 Months [change] Direction Moves Together Strength Insignificant Accuracy 90.48% Values Daily Returns

## HUMANA INC  vs.  AMERICAN FUNDS 2010

 Performance
 Timeline
 HUMANA INC Correlation Profile

### 0 of 100

 Low High
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 current stock price disturbance, may contribute to short-term losses for the investors.
 Performance Backtest Predict
 American Funds 2010 Correlation Profile

### 0 of 100

 Low High
Weak
Over the last 90 days American Funds 2010 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
 Performance Backtest Predict

## HUMANA and American Funds Volatility Contrast

 Predicted Return Density
 Returns

## Pair Trading with HUMANA and American Funds

The main advantage of trading using opposite HUMANA and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.
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The idea behind HUMANA INC and American Funds 2010 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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