Correlation Between HUMANA and Franklin FTSE

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

Diversification Opportunities for HUMANA and Franklin FTSE

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between HUMANA and Franklin is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Franklin FTSE Mexico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Mexico 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 Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Mexico has no effect on the direction of HUMANA i.e., HUMANA and Franklin FTSE go up and down completely randomly.

Pair Corralation between HUMANA and Franklin FTSE

Assuming the 90 days trading horizon HUMANA INC is expected to generate 0.83 times more return on investment than Franklin FTSE. However, HUMANA INC is 1.21 times less risky than Franklin FTSE. It trades about -0.22 of its potential returns per unit of risk. Franklin FTSE Mexico is currently generating about -0.25 per unit of risk. If you would invest  8,111  in HUMANA INC on August 29, 2024 and sell it today you would lose (416.00) from holding HUMANA INC or give up 5.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

HUMANA INC  vs.  Franklin FTSE Mexico

 Performance 
       Timeline  
HUMANA INC 

Risk-Adjusted Performance

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Weak
 
Strong
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 inconsistent 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.
Franklin FTSE Mexico 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Franklin FTSE Mexico has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

HUMANA and Franklin FTSE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HUMANA and Franklin FTSE

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

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