Correlation Between Cigna Corp and Koninklijke Philips

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

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

Diversification Opportunities for Cigna Corp and Koninklijke Philips

0.66

Correlation Coefficient

Cigna Corp  Koninklijke Philips

Poor diversification

The 3 months correlation between Cigna and Koninklijke is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cigna Corp and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips 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 Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Cigna Corp i.e., Cigna Corp and Koninklijke Philips go up and down completely randomly.

Pair Corralation between Cigna Corp and Koninklijke Philips

Allowing for the 90-day total investment horizon Cigna Corp is expected to generate 7.83 times less return on investment than Koninklijke Philips. But when comparing it to its historical volatility, Cigna Corp is 1.34 times less risky than Koninklijke Philips. It trades about 0.01 of its potential returns per unit of risk. Koninklijke Philips NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,599  in Koninklijke Philips NV on September 27, 2024 and sell it today you would earn a total of  949.00  from holding Koninklijke Philips NV or generate 59.35% return on investment over 90 days.

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

Cigna Corp  vs.  Koninklijke Philips NV

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.

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cigna Corp and Koninklijke Philips

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

The idea behind Cigna Corp and Koninklijke Philips NV 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.