Correlation Between HUMANA and Emerald Growth

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

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

Diversification Opportunities for HUMANA and Emerald Growth

-0.49

Correlation Coefficient

HUMANA  Emerald Growth

Very good diversification

The 3 months correlation between HUMANA and Emerald is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Emerald Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Growth 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 Emerald Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Growth has no effect on the direction of HUMANA i.e., HUMANA and Emerald Growth go up and down completely randomly.

Pair Corralation between HUMANA and Emerald Growth

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Emerald Growth. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.63 times less risky than Emerald Growth. The bond trades about -0.18 of its potential returns per unit of risk. The Emerald Growth Fund is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,555  in Emerald Growth Fund on September 12, 2024 and sell it today you would earn a total of  352.00  from holding Emerald Growth Fund or generate 13.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

HUMANA INC  vs.  Emerald Growth Fund

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.

Emerald Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Growth Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Emerald Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Emerald Growth

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

The idea behind HUMANA INC and Emerald Growth Fund 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.