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
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Humana and Cigna is -0.6. 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 2.53 times more volatile than Cigna Corp. It trades about -0.05 of its total potential returns per unit of risk. Cigna Corp is currently generating about 0.07 per unit of volatility. If you would invest 33,602 in Cigna Corp on February 13, 2024 and sell it today you would earn a total of 1,237 from holding Cigna Corp or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Humana Inc vs. Cigna Corp
Performance |
| Timeline |
| Humana Inc |
| Cigna Corp |
Humana and Cigna Corp Volatility Contrast
Predicted Return Density |
| Returns |
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.| Humana vs. Elevance Health | Humana vs. Centene Corp | Humana vs. UnitedHealth Group Incorporated | Humana vs. CVS Health Corp |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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