Correlation Between HUMANA and Star Royalties

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

Diversification Opportunities for HUMANA and Star Royalties

-0.26

Correlation Coefficient

HUMANA  Star Royalties

Very good diversification

The 3 months correlation between HUMANA and Star is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and Star Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star 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 Star Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Royalties has no effect on the direction of HUMANA i.e., HUMANA and Star Royalties go up and down completely randomly.

Pair Corralation between HUMANA and Star Royalties

Assuming the 90 days trading horizon HUMANA INC is expected to generate 18.3 times more return on investment than Star Royalties. However, HUMANA is 18.3 times more volatile than Star Royalties. It trades about 0.07 of its potential returns per unit of risk. Star Royalties is currently generating about 0.01 per unit of risk. If you would invest  8,074  in HUMANA INC on September 3, 2024 and sell it today you would lose (39.00) from holding HUMANA INC or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.74%
Values	Daily Returns

HUMANA INC  vs.  Star Royalties

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.

Star Royalties

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Star Royalties are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Star Royalties reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUMANA and Star Royalties

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

The idea behind HUMANA INC and Star 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.