Correlation Between HUMANA and Orogen Royalties

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

By analyzing existing cross correlation between HUMANA INC and Orogen Royalties, you can compare the effects of market volatilities on HUMANA and Orogen Royalties 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 Orogen Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and Orogen Royalties.

Diversification Opportunities for HUMANA and Orogen Royalties

0.29

Correlation Coefficient

HUMANA  Orogen Royalties

Modest diversification

The 3 months correlation between HUMANA and Orogen is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Orogen Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orogen Royalties 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 Orogen Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orogen Royalties has no effect on the direction of HUMANA i.e., HUMANA and Orogen Royalties go up and down completely randomly.

Pair Corralation between HUMANA and Orogen Royalties

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Orogen Royalties. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 2.65 times less risky than Orogen Royalties. The bond trades about -0.06 of its potential returns per unit of risk. The Orogen Royalties is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Orogen Royalties on December 2, 2024 and sell it today you would earn a total of  2.00  from holding Orogen Royalties or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

HUMANA INC  vs.  Orogen Royalties

HUMANA INC

Risk-Adjusted Performance

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Orogen Royalties

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orogen Royalties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Orogen Royalties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HUMANA and Orogen Royalties

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

The idea behind HUMANA INC and Orogen Royalties 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.