Correlation Between CIGNA and Visteon Corp

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

By analyzing existing cross correlation between CIGNA P 305 and Visteon Corp, you can compare the effects of market volatilities on CIGNA and Visteon 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 CIGNA with a short position of Visteon Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CIGNA and Visteon Corp.

Diversification Opportunities for CIGNA and Visteon Corp

-0.17

Correlation Coefficient

CIGNA  Visteon Corp

Good diversification

The 3 months correlation between CIGNA and Visteon is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding CIGNA P 305 and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp and CIGNA 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 P 305 are associated (or correlated) with Visteon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visteon Corp has no effect on the direction of CIGNA i.e., CIGNA and Visteon Corp go up and down completely randomly.

Pair Corralation between CIGNA and Visteon Corp

Assuming the 90 days trading horizon CIGNA P 305 is expected to under-perform the Visteon Corp. But the bond apears to be less risky and, when comparing its historical volatility, CIGNA P 305 is 1.66 times less risky than Visteon Corp. The bond trades about -0.18 of its potential returns per unit of risk. The Visteon Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,079  in Visteon Corp on September 15, 2024 and sell it today you would earn a total of  234.00  from holding Visteon Corp or generate 2.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.63%
Values	Daily Returns

CIGNA P 305  vs.  Visteon Corp

CIGNA P 305

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIGNA P 305 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for CIGNA P 305 investors.

Visteon Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Visteon Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Visteon Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CIGNA and Visteon Corp

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

The idea behind CIGNA P 305 and Visteon 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.