Correlation Between HUMANA and Sienna Resources

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

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

Diversification Opportunities for HUMANA and Sienna Resources

0.23

Correlation Coefficient

HUMANA  Sienna Resources

Modest diversification

The 3 months correlation between HUMANA and Sienna is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Sienna Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sienna Resources 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 Sienna Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sienna Resources has no effect on the direction of HUMANA i.e., HUMANA and Sienna Resources go up and down completely randomly.

Pair Corralation between HUMANA and Sienna Resources

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the Sienna Resources. But the bond apears to be less risky and, when comparing its historical volatility, HUMANA INC is 10.32 times less risky than Sienna Resources. The bond trades about -0.06 of its potential returns per unit of risk. The Sienna Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2.14  in Sienna Resources on December 1, 2024 and sell it today you would earn a total of  1.26  from holding Sienna Resources or generate 58.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

HUMANA INC  vs.  Sienna Resources

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

Sienna Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sienna Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sienna Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Sienna Resources

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

The idea behind HUMANA INC and Sienna Resources 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.