Correlation Between Pro Blend and HUMANA

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

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

Diversification Opportunities for Pro Blend and HUMANA

0.16

Correlation Coefficient

Pro Blend  HUMANA

Average diversification

The 3 months correlation between Pro and HUMANA is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Pro Blend Extended Term and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Pro Blend 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 Pro Blend Extended Term 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 Pro Blend i.e., Pro Blend and HUMANA go up and down completely randomly.

Pair Corralation between Pro Blend and HUMANA

Assuming the 90 days horizon Pro Blend is expected to generate 519.22 times less return on investment than HUMANA. But when comparing it to its historical volatility, Pro Blend Extended Term is 247.86 times less risky than HUMANA. It trades about 0.05 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,122  in HUMANA INC on February 1, 2024 and sell it today you would lose (26.00) from holding HUMANA INC or give up 0.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.26%
Values	Daily Returns

Pro Blend Extended Term  vs.  HUMANA INC

Pro Blend Extended

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pro Blend Extended Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pro Blend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HUMANA INC

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Pro Blend and HUMANA

The main advantage of trading using opposite Pro Blend and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pro Blend 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 Pro Blend Extended Term 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.