Correlation Between Cigna Corp and Abbott Laboratories

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

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

Diversification Opportunities for Cigna Corp and Abbott Laboratories

0.21

Correlation Coefficient

Cigna Corp  Abbott Laboratories

Modest diversification

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

Pair Corralation between Cigna Corp and Abbott Laboratories

Allowing for the 90-day total investment horizon Cigna Corp is expected to generate 1.39 times less return on investment than Abbott Laboratories. In addition to that, Cigna Corp is 1.45 times more volatile than Abbott Laboratories. It trades about 0.01 of its total potential returns per unit of risk. Abbott Laboratories is currently generating about 0.02 per unit of volatility. If you would invest  10,693  in Abbott Laboratories on September 27, 2024 and sell it today you would earn a total of  783.00  from holding Abbott Laboratories or generate 7.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cigna Corp  vs.  Abbott Laboratories

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 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.

Abbott Laboratories

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Abbott Laboratories 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 Abbott Laboratories

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

The idea behind Cigna Corp and Abbott Laboratories 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.