Correlation Between MACOM Technology and HUMANA

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

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

Diversification Opportunities for MACOM Technology and HUMANA

-0.6

Correlation Coefficient

MACOM Technology  HUMANA

Excellent diversification

The 3 months correlation between MACOM and HUMANA is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and MACOM Technology 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 MACOM Technology Solutions 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 MACOM Technology i.e., MACOM Technology and HUMANA go up and down completely randomly.

Pair Corralation between MACOM Technology and HUMANA

Given the investment horizon of 90 days MACOM Technology Solutions is expected to generate 4.62 times more return on investment than HUMANA. However, MACOM Technology is 4.62 times more volatile than HUMANA INC. It trades about 0.19 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.11 per unit of risk. If you would invest  10,006  in MACOM Technology Solutions on September 4, 2024 and sell it today you would earn a total of  3,684  from holding MACOM Technology Solutions or generate 36.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

MACOM Technology Solutions  vs.  HUMANA INC

MACOM Technology Sol

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MACOM Technology and HUMANA

The main advantage of trading using opposite MACOM Technology and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology 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 MACOM Technology Solutions 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..