Correlation Between GE HealthCare and Cigna Corp

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

Diversification Opportunities for GE HealthCare and Cigna Corp

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between GEHC and Cigna is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding GE HealthCare Technologies and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and GE HealthCare 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 GE HealthCare Technologies 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 GE HealthCare i.e., GE HealthCare and Cigna Corp go up and down completely randomly.

Pair Corralation between GE HealthCare and Cigna Corp

Given the investment horizon of 90 days GE HealthCare Technologies is expected to generate 0.6 times more return on investment than Cigna Corp. However, GE HealthCare Technologies is 1.67 times less risky than Cigna Corp. It trades about -0.2 of its potential returns per unit of risk. Cigna Corp is currently generating about -0.16 per unit of risk. If you would invest  9,298  in GE HealthCare Technologies on September 25, 2024 and sell it today you would lose (1,407) from holding GE HealthCare Technologies or give up 15.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

GE HealthCare Technologies  vs.  Cigna Corp

 Performance 
       Timeline  
GE HealthCare Techno 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days GE HealthCare Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Cigna Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cigna Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent 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.

GE HealthCare and Cigna Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GE HealthCare and Cigna Corp

The main advantage of trading using opposite GE HealthCare and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE HealthCare 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 GE HealthCare Technologies 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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