Correlation Between Humana and Vanguard Consumer

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

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

Diversification Opportunities for Humana and Vanguard Consumer

0.55

Correlation Coefficient

Humana  Vanguard Consumer

Very weak diversification

The 3 months correlation between Humana and Vanguard is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Vanguard Consumer Discretionar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Consumer 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 Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Consumer has no effect on the direction of Humana i.e., Humana and Vanguard Consumer go up and down completely randomly.

Pair Corralation between Humana and Vanguard Consumer

Considering the 90-day investment horizon Humana Inc is expected to generate 1.47 times more return on investment than Vanguard Consumer. However, Humana is 1.47 times more volatile than Vanguard Consumer Discretionary. It trades about 0.05 of its potential returns per unit of risk. Vanguard Consumer Discretionary is currently generating about -0.15 per unit of risk. If you would invest  25,255  in Humana Inc on December 30, 2024 and sell it today you would earn a total of  1,203  from holding Humana Inc or generate 4.76% return on investment over 90 days.

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

Humana Inc  vs.  Vanguard Consumer Discretionar

Humana Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Humana Inc are ranked lower than 3 (%) 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.

Vanguard Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Consumer Discretionary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Etf's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with Humana and Vanguard Consumer

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

The idea behind Humana Inc and Vanguard Consumer Discretionary 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.