Correlation Between Humana and WisdomTree MidCap

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

By analyzing existing cross correlation between Humana Inc and WisdomTree MidCap Dividend, you can compare the effects of market volatilities on Humana and WisdomTree MidCap 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 WisdomTree MidCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and WisdomTree MidCap.

Diversification Opportunities for Humana and WisdomTree MidCap

0.35

Correlation Coefficient

Humana  WisdomTree MidCap

Weak diversification

The 3 months correlation between Humana and WisdomTree is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and WisdomTree MidCap Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree MidCap 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 WisdomTree MidCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree MidCap has no effect on the direction of Humana i.e., Humana and WisdomTree MidCap go up and down completely randomly.

Pair Corralation between Humana and WisdomTree MidCap

Considering the 90-day investment horizon Humana Inc is expected to under-perform the WisdomTree MidCap. In addition to that, Humana is 2.14 times more volatile than WisdomTree MidCap Dividend. It trades about -0.04 of its total potential returns per unit of risk. WisdomTree MidCap Dividend is currently generating about 0.07 per unit of volatility. If you would invest  4,042  in WisdomTree MidCap Dividend on March 13, 2024 and sell it today you would earn a total of  658.00  from holding WisdomTree MidCap Dividend or generate 16.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Humana Inc  vs.  WisdomTree MidCap Dividend

Humana Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Humana Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Humana is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

WisdomTree MidCap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree MidCap Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, WisdomTree MidCap is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Humana and WisdomTree MidCap

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

The idea behind Humana Inc and WisdomTree MidCap Dividend 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.