Correlation Between Humana and Sprott Energy

Can any of the company-specific risk be diversified away by investing in both Humana and Sprott 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 Sprott 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 Sprott Energy Transition, you can compare the effects of market volatilities on Humana and Sprott 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 Sprott Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and Sprott Energy.

Diversification Opportunities for Humana and Sprott Energy

0.26

Correlation Coefficient

Humana  Sprott Energy

Modest diversification

The 3 months correlation between Humana and Sprott is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Sprott Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Energy Transition 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 Sprott Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Energy Transition has no effect on the direction of Humana i.e., Humana and Sprott Energy go up and down completely randomly.

Pair Corralation between Humana and Sprott Energy

Considering the 90-day investment horizon Humana Inc is expected to under-perform the Sprott Energy. But the etf apears to be less risky and, when comparing its historical volatility, Humana Inc is 20.54 times less risky than Sprott Energy. The etf trades about -0.04 of its potential returns per unit of risk. The Sprott Energy Transition is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Sprott Energy Transition on October 7, 2024 and sell it today you would earn a total of  1,570  from holding Sprott Energy Transition or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.78%
Values	Daily Returns

Humana Inc  vs.  Sprott Energy Transition

Humana Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Humana Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Humana displayed solid returns over the last few months and may actually be approaching a breakup point.

Sprott Energy Transition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Energy Transition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Humana and Sprott Energy

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

The idea behind Humana Inc and Sprott Energy Transition 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.