Correlation Between Humana and VanEck Energy

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

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

Diversification Opportunities for Humana and VanEck Energy

-0.23

Correlation Coefficient

Humana  VanEck Energy

Very good diversification

The 3 months correlation between Humana and VanEck is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and VanEck Energy Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Energy Income 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 VanEck Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Energy Income has no effect on the direction of Humana i.e., Humana and VanEck Energy go up and down completely randomly.

Pair Corralation between Humana and VanEck Energy

Considering the 90-day investment horizon Humana Inc is expected to generate 1.69 times more return on investment than VanEck Energy. However, Humana is 1.69 times more volatile than VanEck Energy Income. It trades about 0.45 of its potential returns per unit of risk. VanEck Energy Income is currently generating about 0.07 per unit of risk. If you would invest  30,590  in Humana Inc on February 26, 2024 and sell it today you would earn a total of  4,340  from holding Humana Inc or generate 14.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Humana Inc  vs.  VanEck Energy Income

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. 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.

VanEck Energy Income

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Energy Income are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, VanEck Energy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Humana and VanEck Energy

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

The idea behind Humana Inc and VanEck Energy Income 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..