Correlation Between HUMANA and SPDR SP

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

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

Diversification Opportunities for HUMANA and SPDR SP

0.76

Correlation Coefficient

HUMANA  SPDR SP

Poor diversification

The 3 months correlation between HUMANA and SPDR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and SPDR SP Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Dividend 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Dividend has no effect on the direction of HUMANA i.e., HUMANA and SPDR SP go up and down completely randomly.

Pair Corralation between HUMANA and SPDR SP

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the SPDR SP. In addition to that, HUMANA is 1.58 times more volatile than SPDR SP Dividend. It trades about -0.09 of its total potential returns per unit of risk. SPDR SP Dividend is currently generating about 0.22 per unit of volatility. If you would invest  13,454  in SPDR SP Dividend on December 2, 2024 and sell it today you would earn a total of  375.00  from holding SPDR SP Dividend or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

HUMANA INC  vs.  SPDR SP Dividend

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.

SPDR SP Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUMANA and SPDR SP

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

The idea behind HUMANA INC and SPDR SP Dividend 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.