Correlation Between HUMANA and Emerging Markets

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

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

Diversification Opportunities for HUMANA and Emerging Markets

-0.1

Correlation Coefficient

HUMANA  Emerging Markets

Good diversification

The 3 months correlation between HUMANA and Emerging is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Emerging Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Por 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Por has no effect on the direction of HUMANA i.e., HUMANA and Emerging Markets go up and down completely randomly.

Pair Corralation between HUMANA and Emerging Markets

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Emerging Markets. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 1.49 times less risky than Emerging Markets. The bond trades about -0.12 of its potential returns per unit of risk. The Emerging Markets Portfolio is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,719  in Emerging Markets Portfolio on September 11, 2024 and sell it today you would earn a total of  117.00  from holding Emerging Markets Portfolio or generate 4.3% 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.  Emerging Markets Portfolio

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

Emerging Markets Por

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Portfolio are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Emerging Markets 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 Emerging Markets

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

The idea behind HUMANA INC and Emerging Markets Portfolio 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.