Correlation Between HUMANA and Lord Abbett

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Can any of the company-specific risk be diversified away by investing in both HUMANA and Lord Abbett 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 Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HUMANA INC and Lord Abbett Trust, you can compare the effects of market volatilities on HUMANA and Lord Abbett 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 Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and Lord Abbett.

Diversification Opportunities for HUMANA and Lord Abbett

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between HUMANA and Lord is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Lord Abbett Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Trust 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 Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Trust has no effect on the direction of HUMANA i.e., HUMANA and Lord Abbett go up and down completely randomly.

Pair Corralation between HUMANA and Lord Abbett

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Lord Abbett. In addition to that, HUMANA is 1.12 times more volatile than Lord Abbett Trust. It trades about -0.09 of its total potential returns per unit of risk. Lord Abbett Trust is currently generating about 0.27 per unit of volatility. If you would invest  1,548  in Lord Abbett Trust on November 27, 2024 and sell it today you would earn a total of  72.00  from holding Lord Abbett Trust or generate 4.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

HUMANA INC  vs.  Lord Abbett Trust

 Performance 
       Timeline  
HUMANA INC 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 latest stock price disturbance, may contribute to short-term losses for the investors.
Lord Abbett Trust 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Trust are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Lord Abbett is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HUMANA and Lord Abbett Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HUMANA and Lord Abbett

The main advantage of trading using opposite HUMANA and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, Lord Abbett 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 Lord Abbett will offset losses from the drop in Lord Abbett's long position.
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The idea behind HUMANA INC and Lord Abbett Trust 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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Check out your portfolio center.
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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