Correlation Between GE HealthCare and Cigna Corp
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
GE HealthCare Technologies vs. Cigna Corp
Performance |
Timeline |
GE HealthCare Techno |
Cigna Corp |
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.GE HealthCare vs. Teladoc | GE HealthCare vs. Veeva Systems Class | GE HealthCare vs. 10X Genomics | GE HealthCare vs. Progyny |
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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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