Correlation Between HUMANA and Caldwell Partners

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

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

Diversification Opportunities for HUMANA and Caldwell Partners

0.27

Correlation Coefficient

HUMANA  Caldwell Partners

Modest diversification

The 3 months correlation between HUMANA and Caldwell is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and The Caldwell Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Partners 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 Caldwell Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Partners has no effect on the direction of HUMANA i.e., HUMANA and Caldwell Partners go up and down completely randomly.

Pair Corralation between HUMANA and Caldwell Partners

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Caldwell Partners. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 4.38 times less risky than Caldwell Partners. The bond trades about -0.09 of its potential returns per unit of risk. The The Caldwell Partners is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  80.00  in The Caldwell Partners on September 3, 2024 and sell it today you would lose (1.00) from holding The Caldwell Partners or give up 1.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

HUMANA INC  vs.  The Caldwell Partners

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

Caldwell Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Caldwell Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Caldwell Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HUMANA and Caldwell Partners

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

The idea behind HUMANA INC and The Caldwell Partners 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.