Correlation Between Vanguard Small-cap and HUMANA

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

By analyzing existing cross correlation between Vanguard Small Cap Index and HUMANA INC, you can compare the effects of market volatilities on Vanguard Small-cap and HUMANA 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 Vanguard Small-cap with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and HUMANA.

Diversification Opportunities for Vanguard Small-cap and HUMANA

-0.63

Correlation Coefficient

Vanguard Small-cap  HUMANA

Excellent diversification

The 3 months correlation between Vanguard and HUMANA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Vanguard Small-cap 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 Vanguard Small Cap Index are associated (or correlated) with HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and HUMANA go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and HUMANA

Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 1.2 times more return on investment than HUMANA. However, Vanguard Small-cap is 1.2 times more volatile than HUMANA INC. It trades about 0.23 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.15 per unit of risk. If you would invest  10,863  in Vanguard Small Cap Index on September 2, 2024 and sell it today you would earn a total of  1,611  from holding Vanguard Small Cap Index or generate 14.83% return on investment over 90 days.

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

Vanguard Small Cap Index  vs.  HUMANA INC

Vanguard Small Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small-cap showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Vanguard Small-cap and HUMANA

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

The idea behind Vanguard Small Cap Index and HUMANA INC 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.