Correlation Between HUMANA and Sp Smallcap

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

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

Diversification Opportunities for HUMANA and Sp Smallcap

-0.52

Correlation Coefficient

HUMANA  Sp Smallcap

Excellent diversification

The 3 months correlation between HUMANA and SMCIX is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Sp Smallcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap Index 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 Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap Index has no effect on the direction of HUMANA i.e., HUMANA and Sp Smallcap go up and down completely randomly.

Pair Corralation between HUMANA and Sp Smallcap

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Sp Smallcap. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.99 times less risky than Sp Smallcap. The bond trades about -0.15 of its potential returns per unit of risk. The Sp Smallcap Index is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,312  in Sp Smallcap Index on September 2, 2024 and sell it today you would earn a total of  66.00  from holding Sp Smallcap Index or generate 2.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

HUMANA INC  vs.  Sp Smallcap Index

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.

Sp Smallcap Index

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sp Smallcap Index are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Sp Smallcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUMANA and Sp Smallcap

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

The idea behind HUMANA INC and Sp Smallcap Index 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.