Correlation Between Cigna Corp and Addus HomeCare

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

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

Diversification Opportunities for Cigna Corp and Addus HomeCare

0.21

Correlation Coefficient

Cigna Corp  Addus HomeCare

Modest diversification

The 3 months correlation between Cigna and Addus is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cigna Corp and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Cigna 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 Cigna Corp are associated (or correlated) with Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of Cigna Corp i.e., Cigna Corp and Addus HomeCare go up and down completely randomly.

Pair Corralation between Cigna Corp and Addus HomeCare

Allowing for the 90-day total investment horizon Cigna Corp is expected to under-perform the Addus HomeCare. But the stock apears to be less risky and, when comparing its historical volatility, Cigna Corp is 1.24 times less risky than Addus HomeCare. The stock trades about 0.0 of its potential returns per unit of risk. The Addus HomeCare is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,930  in Addus HomeCare on September 24, 2024 and sell it today you would earn a total of  3,163  from holding Addus HomeCare or generate 31.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Cigna Corp  vs.  Addus HomeCare

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 January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Addus HomeCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Addus HomeCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Addus HomeCare is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cigna Corp and Addus HomeCare

The main advantage of trading using opposite Cigna Corp and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cigna Corp position performs unexpectedly, Addus HomeCare 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 Addus HomeCare will offset losses from the drop in Addus HomeCare's long position.

The idea behind Cigna Corp and Addus HomeCare 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.