Correlation Between Cigna Corp and ResMed

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

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

Diversification Opportunities for Cigna Corp and ResMed

0.16

Correlation Coefficient

Cigna Corp  ResMed

Average diversification

The 3 months correlation between Cigna and ResMed is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cigna Corp and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Cigna Corp i.e., Cigna Corp and ResMed go up and down completely randomly.

Pair Corralation between Cigna Corp and ResMed

Allowing for the 90-day total investment horizon Cigna Corp is expected to generate 8.66 times less return on investment than ResMed. But when comparing it to its historical volatility, Cigna Corp is 1.28 times less risky than ResMed. It trades about 0.0 of its potential returns per unit of risk. ResMed Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  20,496  in ResMed Inc on September 27, 2024 and sell it today you would earn a total of  2,892  from holding ResMed Inc or generate 14.11% return on investment over 90 days.

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

Cigna Corp  vs.  ResMed Inc

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.

ResMed Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ResMed Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, ResMed is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cigna Corp and ResMed

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

The idea behind Cigna Corp and ResMed Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.