Correlation Between Cigna Corp and Tela Bio

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

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

Diversification Opportunities for Cigna Corp and Tela Bio

-0.42

Correlation Coefficient

Cigna Corp  Tela Bio

Very good diversification

The 3 months correlation between Cigna and Tela is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cigna Corp and Tela Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tela Bio 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 Tela Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tela Bio has no effect on the direction of Cigna Corp i.e., Cigna Corp and Tela Bio go up and down completely randomly.

Pair Corralation between Cigna Corp and Tela Bio

Allowing for the 90-day total investment horizon Cigna Corp is expected to under-perform the Tela Bio. But the stock apears to be less risky and, when comparing its historical volatility, Cigna Corp is 1.34 times less risky than Tela Bio. The stock trades about -0.32 of its potential returns per unit of risk. The Tela Bio is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  301.00  in Tela Bio on September 23, 2024 and sell it today you would lose (16.00) from holding Tela Bio or give up 5.32% of portfolio value over 90 days.

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

Cigna Corp  vs.  Tela Bio

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.

Tela Bio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tela Bio are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent essential indicators, Tela Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cigna Corp and Tela Bio

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

The idea behind Cigna Corp and Tela Bio 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.