Correlation Between Cigna Corp and Humana

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

By analyzing existing cross correlation between Cigna Corp and Humana Inc, you can compare the effects of market volatilities on Cigna Corp and Humana 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 Cigna Corp with a short position of Humana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cigna Corp and Humana.

Diversification Opportunities for Cigna Corp and Humana

0.6

Correlation Coefficient

Cigna Corp  Humana

Poor diversification

The 3 months correlation between Cigna and Humana is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cigna Corp and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc and Cigna Corp 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 Cigna Corp are associated (or correlated) with Humana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humana Inc has no effect on the direction of Cigna Corp i.e., Cigna Corp and Humana go up and down completely randomly.

Pair Corralation between Cigna Corp and Humana

Allowing for the 90-day total investment horizon Cigna Corp is expected to generate 0.52 times more return on investment than Humana. However, Cigna Corp is 1.91 times less risky than Humana. It trades about -0.06 of its potential returns per unit of risk. Humana Inc is currently generating about -0.08 per unit of risk. If you would invest  36,408  in Cigna Corp on September 1, 2024 and sell it today you would lose (2,628) from holding Cigna Corp or give up 7.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cigna Corp  vs.  Humana Inc

Cigna Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cigna Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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. In spite of abnormal performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Cigna Corp and Humana

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

The idea behind Cigna Corp and Humana Inc 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.