Can any of the company-specific risk be diversified away by investing in both Vanguard 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 Vanguard and HUMANA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Sp Mid Cap and HUMANA INC, you can compare the effects of market volatilities on Vanguard 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 Vanguard with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and HUMANA.
Diversification Opportunities for Vanguard and HUMANA
The 3 months correlation between Vanguard and HUMANA is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Sp Mid Cap and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Vanguard 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 Vanguard Sp Mid Cap 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 Vanguard i.e., Vanguard and HUMANA go up and down completely randomly.
Assuming the 90 days horizon Vanguard is expected to generate 2.21 times less return on investment than HUMANA. In addition to that, Vanguard is 1.11 times more volatile than HUMANA INC. It trades about 0.07 of its total potential returns per unit of risk. HUMANA INC is currently generating about 0.17 per unit of volatility. If you would invest 7,900 in HUMANA INC on March 6, 2024 and sell it today you would earn a total of 196.00 from holding HUMANA INC or generate 2.48% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Sp Mid Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
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.