Correlation Between HUMANA and Royce Smaller

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

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

Diversification Opportunities for HUMANA and Royce Smaller

-0.49

Correlation Coefficient

HUMANA  Royce Smaller

Very good diversification

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

Pair Corralation between HUMANA and Royce Smaller

Assuming the 90 days trading horizon HUMANA INC is expected to generate 58.51 times more return on investment than Royce Smaller. However, HUMANA is 58.51 times more volatile than Royce Smaller Companies Growth. It trades about 0.07 of its potential returns per unit of risk. Royce Smaller Companies Growth is currently generating about 0.07 per unit of risk. If you would invest  7,953  in HUMANA INC on September 12, 2024 and sell it today you would lose (258.00) from holding HUMANA INC or give up 3.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.13%
Values	Daily Returns

HUMANA INC  vs.  Royce Smaller Companies Growth

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.

Royce Smaller Companies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Smaller Companies Growth are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Royce Smaller showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Royce Smaller

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

The idea behind HUMANA INC and Royce Smaller Companies Growth 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.