Correlation Between Humana and Russell Equity

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

By analyzing existing cross correlation between Humana Inc and Russell Equity Income, you can compare the effects of market volatilities on Humana and Russell Equity 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 Russell Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and Russell Equity.

Diversification Opportunities for Humana and Russell Equity

-0.2

Correlation Coefficient

Humana  Russell Equity

Good diversification

The 3 months correlation between Humana and Russell is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Russell Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell Equity Income 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 Russell Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell Equity Income has no effect on the direction of Humana i.e., Humana and Russell Equity go up and down completely randomly.

Pair Corralation between Humana and Russell Equity

Considering the 90-day investment horizon Humana Inc is expected to under-perform the Russell Equity. In addition to that, Humana is 1.32 times more volatile than Russell Equity Income. It trades about -0.05 of its total potential returns per unit of risk. Russell Equity Income is currently generating about 0.1 per unit of volatility. If you would invest  4,579  in Russell Equity Income on September 12, 2024 and sell it today you would earn a total of  677.00  from holding Russell Equity Income or generate 14.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Humana Inc  vs.  Russell Equity Income

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. In spite of latest abnormal performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Russell Equity Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Russell Equity Income are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Russell Equity displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Humana and Russell Equity

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

The idea behind Humana Inc and Russell Equity Income 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.