Correlation Between Edwards Lifesciences and Cigna Corp

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

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

Diversification Opportunities for Edwards Lifesciences and Cigna Corp

-0.5

Correlation Coefficient

Edwards Lifesciences  Cigna Corp

Very good diversification

The 3 months correlation between Edwards and Cigna is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Edwards Lifesciences 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 Edwards Lifesciences Corp are associated (or correlated) with Cigna Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cigna Corp has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Cigna Corp go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Cigna Corp

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to under-perform the Cigna Corp. But the stock apears to be less risky and, when comparing its historical volatility, Edwards Lifesciences Corp is 1.08 times less risky than Cigna Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Cigna Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  27,735  in Cigna Corp on December 27, 2024 and sell it today you would earn a total of  4,388  from holding Cigna Corp or generate 15.82% return on investment over 90 days.

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

Edwards Lifesciences Corp  vs.  Cigna Corp

Edwards Lifesciences Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edwards Lifesciences Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Edwards Lifesciences is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cigna Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cigna Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal forward indicators, Cigna Corp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edwards Lifesciences and Cigna Corp

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

The idea behind Edwards Lifesciences Corp and Cigna Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.