Correlation Between Humana and Vanguard Energy

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

Diversification Opportunities for Humana and Vanguard Energy

0.56

Correlation Coefficient

Humana  Vanguard Energy

Very weak diversification

The 3 months correlation between Humana and Vanguard is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Vanguard Energy Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Energy Index 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Energy Index has no effect on the direction of Humana i.e., Humana and Vanguard Energy go up and down completely randomly.

Pair Corralation between Humana and Vanguard Energy

Considering the 90-day investment horizon Humana is expected to generate 1.11 times less return on investment than Vanguard Energy. In addition to that, Humana is 1.7 times more volatile than Vanguard Energy Index. It trades about 0.06 of its total potential returns per unit of risk. Vanguard Energy Index is currently generating about 0.11 per unit of volatility. If you would invest  11,878  in Vanguard Energy Index on December 28, 2024 and sell it today you would earn a total of  1,024  from holding Vanguard Energy Index or generate 8.62% 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 Energy Index

Humana Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Humana Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Humana may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Energy Index

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Energy Index are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Vanguard Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Humana and Vanguard Energy

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

The idea behind Humana Inc and Vanguard Energy Index 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.