Correlation Between Humana and Cigna Corp

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

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

Diversification Opportunities for Humana and Cigna Corp

-0.68

Correlation Coefficient

Humana  Cigna Corp

Excellent diversification

The 3 months correlation between Humana and Cigna is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Humana 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 Humana Inc 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 Humana i.e., Humana and Cigna Corp go up and down completely randomly.

Pair Corralation between Humana and Cigna Corp

Considering the 90-day investment horizon Humana Inc is expected to under-perform the Cigna Corp. In addition to that, Humana is 5.21 times more volatile than Cigna Corp. It trades about -0.18 of its total potential returns per unit of risk. Cigna Corp is currently generating about -0.21 per unit of volatility. If you would invest  36,408  in Cigna Corp on January 30, 2024 and sell it today you would lose (961.00) from holding Cigna Corp or give up 2.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Humana Inc  vs.  Cigna Corp

Humana Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humana Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Cigna Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cigna Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Cigna Corp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Humana and Cigna Corp

The main advantage of trading using opposite Humana and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Humana 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 Humana Inc 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.