Correlation Between Cigna Corp and Molina Healthcare

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

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

Diversification Opportunities for Cigna Corp and Molina Healthcare

0.61

Correlation Coefficient

Cigna Corp  Molina Healthcare

Poor diversification

The 3 months correlation between Cigna and Molina is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cigna Corp and Molina Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molina Healthcare 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 Molina Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molina Healthcare has no effect on the direction of Cigna Corp i.e., Cigna Corp and Molina Healthcare go up and down completely randomly.

Pair Corralation between Cigna Corp and Molina Healthcare

Allowing for the 90-day total investment horizon Cigna Corp is expected to generate 0.49 times more return on investment than Molina Healthcare. However, Cigna Corp is 2.04 times less risky than Molina Healthcare. It trades about -0.06 of its potential returns per unit of risk. Molina Healthcare is currently generating about -0.06 per unit of risk. If you would invest  36,408  in Cigna Corp on September 2, 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.  Molina Healthcare

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.

Molina Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Molina Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Cigna Corp and Molina Healthcare

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

The idea behind Cigna Corp and Molina Healthcare 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 Anywhere module to track or share privately all of your investments from the convenience of any device.