Correlation Between HUMANA and WisdomTree Trust

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

By analyzing existing cross correlation between HUMANA INC and WisdomTree Trust , you can compare the effects of market volatilities on HUMANA and WisdomTree Trust 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 WisdomTree Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and WisdomTree Trust.

Diversification Opportunities for HUMANA and WisdomTree Trust

0.06

Correlation Coefficient

HUMANA  WisdomTree Trust

Significant diversification

The 3 months correlation between HUMANA and WisdomTree is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust 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 WisdomTree Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Trust has no effect on the direction of HUMANA i.e., HUMANA and WisdomTree Trust go up and down completely randomly.

Pair Corralation between HUMANA and WisdomTree Trust

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the WisdomTree Trust. In addition to that, HUMANA is 1.25 times more volatile than WisdomTree Trust . It trades about -0.17 of its total potential returns per unit of risk. WisdomTree Trust is currently generating about -0.07 per unit of volatility. If you would invest  11,066  in WisdomTree Trust on September 30, 2024 and sell it today you would lose (334.00) from holding WisdomTree Trust or give up 3.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

HUMANA INC  vs.  WisdomTree Trust

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 latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HUMANA INC investors.

WisdomTree Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, WisdomTree Trust is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with HUMANA and WisdomTree Trust

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

The idea behind HUMANA INC and WisdomTree Trust 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .