Correlation Between Voya Financial and Cigna Corp

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

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

Diversification Opportunities for Voya Financial and Cigna Corp

0.36

Correlation Coefficient

Voya Financial  Cigna Corp

Weak diversification

The 3 months correlation between Voya and Cigna is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Voya Financial and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Voya Financial 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 Voya Financial 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 Voya Financial i.e., Voya Financial and Cigna Corp go up and down completely randomly.

Pair Corralation between Voya Financial and Cigna Corp

Given the investment horizon of 90 days Voya Financial is expected to under-perform the Cigna Corp. But the stock apears to be less risky and, when comparing its historical volatility, Voya Financial is 1.22 times less risky than Cigna Corp. The stock trades about 0.0 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  26,429  in Cigna Corp on December 17, 2024 and sell it today you would earn a total of  4,833  from holding Cigna Corp or generate 18.29% return on investment over 90 days.

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

Voya Financial  vs.  Cigna Corp

Voya Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Voya Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Voya Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cigna Corp

Risk-Adjusted Performance

Good

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 Voya Financial and Cigna Corp

The main advantage of trading using opposite Voya Financial and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Voya Financial 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 Voya Financial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.