Correlation Between Electromed and Cigna Corp

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

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

Diversification Opportunities for Electromed and Cigna Corp

-0.66

Correlation Coefficient

Electromed  Cigna Corp

Excellent diversification

The 3 months correlation between Electromed and Cigna is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Electromed and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Electromed 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 Electromed are associated (or correlated) with Cigna Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cigna Corp has no effect on the direction of Electromed i.e., Electromed and Cigna Corp go up and down completely randomly.

Pair Corralation between Electromed and Cigna Corp

Given the investment horizon of 90 days Electromed is expected to generate 1.65 times more return on investment than Cigna Corp. However, Electromed is 1.65 times more volatile than Cigna Corp. It trades about 0.35 of its potential returns per unit of risk. Cigna Corp is currently generating about -0.06 per unit of risk. If you would invest  1,715  in Electromed on August 30, 2024 and sell it today you would earn a total of  1,391  from holding Electromed or generate 81.11% return on investment over 90 days.

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

Electromed  vs.  Cigna Corp

Electromed

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 fairly strong forward indicators, Cigna Corp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Electromed and Cigna Corp

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

The idea behind Electromed and Cigna Corp 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.