Correlation Between Health Catalyst and Cigna Corp

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

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

Diversification Opportunities for Health Catalyst and Cigna Corp

0.63

Correlation Coefficient

Health Catalyst  Cigna Corp

Poor diversification

The 3 months correlation between Health and Cigna is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Health Catalyst and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Health Catalyst 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 Health Catalyst 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 Health Catalyst i.e., Health Catalyst and Cigna Corp go up and down completely randomly.

Pair Corralation between Health Catalyst and Cigna Corp

Given the investment horizon of 90 days Health Catalyst is expected to under-perform the Cigna Corp. But the stock apears to be less risky and, when comparing its historical volatility, Health Catalyst is 1.0 times less risky than Cigna Corp. The stock trades about -0.34 of its potential returns per unit of risk. The Cigna Corp is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  31,915  in Cigna Corp on October 10, 2024 and sell it today you would lose (3,922) from holding Cigna Corp or give up 12.29% of portfolio value over 90 days.

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

Health Catalyst  vs.  Cigna Corp

Health Catalyst

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Catalyst has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 abnormal performance in the last few months, the Stock's forward 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.

Pair Trading with Health Catalyst and Cigna Corp

The main advantage of trading using opposite Health Catalyst and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Catalyst 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 Health Catalyst 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.