Correlation Between Cigna Corp and HealthEquity

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

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

Diversification Opportunities for Cigna Corp and HealthEquity

-0.63

Correlation Coefficient

Cigna Corp  HealthEquity

Excellent diversification

The 3 months correlation between Cigna and HealthEquity is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cigna Corp and HealthEquity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthEquity 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 HealthEquity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthEquity has no effect on the direction of Cigna Corp i.e., Cigna Corp and HealthEquity go up and down completely randomly.

Pair Corralation between Cigna Corp and HealthEquity

Allowing for the 90-day total investment horizon Cigna Corp is expected to under-perform the HealthEquity. But the stock apears to be less risky and, when comparing its historical volatility, Cigna Corp is 1.31 times less risky than HealthEquity. The stock trades about -0.06 of its potential returns per unit of risk. The HealthEquity is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7,956  in HealthEquity on August 30, 2024 and sell it today you would earn a total of  2,291  from holding HealthEquity or generate 28.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Cigna Corp  vs.  HealthEquity

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 fairly strong forward indicators, Cigna Corp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

HealthEquity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HealthEquity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, HealthEquity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cigna Corp and HealthEquity

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

The idea behind Cigna Corp and HealthEquity 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.