Correlation Between HUMANA and Constellation Energy

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

Diversification Opportunities for HUMANA and Constellation Energy

-0.53

Correlation Coefficient

HUMANA  Constellation Energy

Excellent diversification

The 3 months correlation between HUMANA and Constellation is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Constellation Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Energy Corp 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 Constellation Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Energy Corp has no effect on the direction of HUMANA i.e., HUMANA and Constellation Energy go up and down completely randomly.

Pair Corralation between HUMANA and Constellation Energy

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Constellation Energy. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 6.53 times less risky than Constellation Energy. The bond trades about -0.09 of its potential returns per unit of risk. The Constellation Energy Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  17,750  in Constellation Energy Corp on September 3, 2024 and sell it today you would earn a total of  7,906  from holding Constellation Energy Corp or generate 44.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

HUMANA INC  vs.  Constellation Energy Corp

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. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Constellation Energy Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Energy Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Constellation Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Constellation Energy

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

The idea behind HUMANA INC and Constellation Energy Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.