Correlation Between HUMANA and Franklin Mutual

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

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

Diversification Opportunities for HUMANA and Franklin Mutual

-0.39

Correlation Coefficient

HUMANA  Franklin Mutual

Very good diversification

The 3 months correlation between HUMANA and Franklin is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Franklin Mutual Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Shares 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 Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Shares has no effect on the direction of HUMANA i.e., HUMANA and Franklin Mutual go up and down completely randomly.

Pair Corralation between HUMANA and Franklin Mutual

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Franklin Mutual. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.11 times less risky than Franklin Mutual. The bond trades about -0.09 of its potential returns per unit of risk. The Franklin Mutual Shares is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,728  in Franklin Mutual Shares on September 3, 2024 and sell it today you would earn a total of  206.00  from holding Franklin Mutual Shares or generate 7.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

HUMANA INC  vs.  Franklin Mutual Shares

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.

Franklin Mutual Shares

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Shares are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Franklin Mutual may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HUMANA and Franklin Mutual

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

The idea behind HUMANA INC and Franklin Mutual Shares 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.