Correlation Between Humana and PIMCO Mortgage

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

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

Diversification Opportunities for Humana and PIMCO Mortgage

0.26

Correlation Coefficient

Humana  PIMCO Mortgage

Modest diversification

The 3 months correlation between Humana and PIMCO is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and PIMCO Mortgage Backed Securiti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Mortgage Backed 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 PIMCO Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Mortgage Backed has no effect on the direction of Humana i.e., Humana and PIMCO Mortgage go up and down completely randomly.

Pair Corralation between Humana and PIMCO Mortgage

Considering the 90-day investment horizon Humana Inc is expected to under-perform the PIMCO Mortgage. In addition to that, Humana is 9.54 times more volatile than PIMCO Mortgage Backed Securities. It trades about -0.09 of its total potential returns per unit of risk. PIMCO Mortgage Backed Securities is currently generating about -0.08 per unit of volatility. If you would invest  4,958  in PIMCO Mortgage Backed Securities on September 5, 2024 and sell it today you would lose (74.00) from holding PIMCO Mortgage Backed Securities or give up 1.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.25%
Values	Daily Returns

Humana Inc  vs.  PIMCO Mortgage Backed Securiti

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 abnormal performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

PIMCO Mortgage Backed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Mortgage Backed Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, PIMCO Mortgage is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Humana and PIMCO Mortgage

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

The idea behind Humana Inc and PIMCO Mortgage Backed Securities 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.