Correlation Between Evolent Health and Cigna Corp

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

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

Diversification Opportunities for Evolent Health and Cigna Corp

0.41

Correlation Coefficient

Evolent Health  Cigna Corp

Very weak diversification

The 3 months correlation between Evolent and Cigna is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Evolent Health and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Evolent Health 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 Evolent Health 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 Evolent Health i.e., Evolent Health and Cigna Corp go up and down completely randomly.

Pair Corralation between Evolent Health and Cigna Corp

Considering the 90-day investment horizon Evolent Health is expected to under-perform the Cigna Corp. In addition to that, Evolent Health is 3.82 times more volatile than Cigna Corp. It trades about -0.13 of its total potential returns per unit of risk. Cigna Corp is currently generating about 0.25 per unit of volatility. If you would invest  28,158  in Cigna Corp on October 26, 2024 and sell it today you would earn a total of  1,341  from holding Cigna Corp or generate 4.76% return on investment over 90 days.

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

Evolent Health  vs.  Cigna Corp

Evolent Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolent Health 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 February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 Evolent Health and Cigna Corp

The main advantage of trading using opposite Evolent Health and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolent Health 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 Evolent Health 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.