Correlation Between Centene Corp and Cigna Corp

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

Diversification Opportunities for Centene Corp and Cigna Corp

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Centene and Cigna is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Centene Corp and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Centene Corp 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 Centene Corp 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 Centene Corp i.e., Centene Corp and Cigna Corp go up and down completely randomly.

Pair Corralation between Centene Corp and Cigna Corp

Considering the 90-day investment horizon Centene Corp is expected to under-perform the Cigna Corp. In addition to that, Centene Corp is 1.02 times more volatile than Cigna Corp. It trades about 0.0 of its total potential returns per unit of risk. Cigna Corp is currently generating about 0.05 per unit of volatility. If you would invest  24,929  in Cigna Corp on December 29, 2023 and sell it today you would earn a total of  11,405  from holding Cigna Corp or generate 45.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Centene Corp  vs.  Cigna Corp

 Performance 
       Timeline  
Centene Corp 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Centene Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Centene Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Cigna Corp 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Cigna Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal forward indicators, Cigna Corp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Centene Corp and Cigna Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Centene Corp and Cigna Corp

The main advantage of trading using opposite Centene Corp and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centene Corp 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 Centene Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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