Correlation Between HUMANA and Voip PalCom

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

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

Diversification Opportunities for HUMANA and Voip PalCom

0.4

Correlation Coefficient

HUMANA  Voip PalCom

Very weak diversification

The 3 months correlation between HUMANA and Voip is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Voip PalCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voip PalCom 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 Voip PalCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voip PalCom has no effect on the direction of HUMANA i.e., HUMANA and Voip PalCom go up and down completely randomly.

Pair Corralation between HUMANA and Voip PalCom

Assuming the 90 days trading horizon HUMANA INC is expected to generate 0.14 times more return on investment than Voip PalCom. However, HUMANA INC is 6.94 times less risky than Voip PalCom. It trades about -0.17 of its potential returns per unit of risk. Voip PalCom is currently generating about -0.08 per unit of risk. If you would invest  8,466  in HUMANA INC on September 15, 2024 and sell it today you would lose (771.00) from holding HUMANA INC or give up 9.11% of portfolio value over 90 days.

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

HUMANA INC  vs.  Voip PalCom

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.

Voip PalCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voip PalCom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with HUMANA and Voip PalCom

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

The idea behind HUMANA INC and Voip PalCom 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .