Correlation Between Centene Corp and Alignment Healthcare

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

Diversification Opportunities for Centene Corp and Alignment Healthcare

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Centene and Alignment is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Centene Corp and Alignment Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alignment Healthcare 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 Alignment Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alignment Healthcare has no effect on the direction of Centene Corp i.e., Centene Corp and Alignment Healthcare go up and down completely randomly.

Pair Corralation between Centene Corp and Alignment Healthcare

Considering the 90-day investment horizon Centene Corp is expected to generate 0.44 times more return on investment than Alignment Healthcare. However, Centene Corp is 2.25 times less risky than Alignment Healthcare. It trades about 0.09 of its potential returns per unit of risk. Alignment Healthcare is currently generating about 0.01 per unit of risk. If you would invest  6,431  in Centene Corp on May 17, 2022 and sell it today you would earn a total of  3,233  from holding Centene Corp or generate 50.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Centene Corp  vs.  Alignment Healthcare

 Performance (%) 
       Timeline  
Centene Corp 
Centene Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Centene Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Centene Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Centene Price Channel

Alignment Healthcare 
Alignment Performance
18 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alignment Healthcare are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Alignment Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Alignment Price Channel

Centene Corp and Alignment Healthcare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Centene Corp and Alignment Healthcare

The main advantage of trading using opposite Centene Corp and Alignment Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centene Corp position performs unexpectedly, Alignment Healthcare 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 Alignment Healthcare will offset losses from the drop in Alignment Healthcare's long position.
The idea behind Centene Corp and Alignment Healthcare 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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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