Correlation Between Aetna and Magellan Health

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Can any of the company-specific risk be diversified away by investing in both Aetna and Magellan Health 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 Aetna and Magellan Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aetna Inc and Magellan Health, you can compare the effects of market volatilities on Aetna and Magellan Health 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 Aetna with a short position of Magellan Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aetna and Magellan Health.

Diversification Opportunities for Aetna and Magellan Health

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Aetna and Magellan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aetna Inc and Magellan Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Health and Aetna 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 Aetna Inc are associated (or correlated) with Magellan Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Health has no effect on the direction of Aetna i.e., Aetna and Magellan Health go up and down completely randomly.

Pair Corralation between Aetna and Magellan Health

If you would invest (100.00) in Magellan Health on December 30, 2023 and sell it today you would earn a total of  100.00  from holding Magellan Health or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Aetna Inc  vs.  Magellan Health

 Performance 
       Timeline  
Aetna Inc 

Risk-Adjusted Performance

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Over the last 90 days Aetna Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Aetna is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Magellan Health 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Magellan Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Magellan Health is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Aetna and Magellan Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aetna and Magellan Health

The main advantage of trading using opposite Aetna and Magellan Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aetna position performs unexpectedly, Magellan Health 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 Magellan Health will offset losses from the drop in Magellan Health's long position.
The idea behind Aetna Inc and Magellan Health 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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