Correlation Between Globe Life and Cigna Corp

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

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

Diversification Opportunities for Globe Life and Cigna Corp

-0.14

Correlation Coefficient

Globe Life  Cigna Corp

Good diversification

The 3 months correlation between Globe and Cigna is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Globe Life and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Globe Life 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 Globe Life 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 Globe Life i.e., Globe Life and Cigna Corp go up and down completely randomly.

Pair Corralation between Globe Life and Cigna Corp

Allowing for the 90-day total investment horizon Globe Life is expected to generate 0.92 times more return on investment than Cigna Corp. However, Globe Life is 1.09 times less risky than Cigna Corp. It trades about 0.49 of its potential returns per unit of risk. Cigna Corp is currently generating about 0.25 per unit of risk. If you would invest  11,061  in Globe Life on October 26, 2024 and sell it today you would earn a total of  992.00  from holding Globe Life or generate 8.97% return on investment over 90 days.

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

Globe Life  vs.  Cigna Corp

Globe Life

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globe Life are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Globe Life disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 fairly strong forward indicators, Cigna Corp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Globe Life and Cigna Corp

The main advantage of trading using opposite Globe Life and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globe Life 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 Globe Life 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.