Correlation Between Cigna Corp and American Equity
Can any of the company-specific risk be diversified away by investing in both Cigna Corp and American Equity 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 American Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cigna Corp and American Equity Investment, you can compare the effects of market volatilities on Cigna Corp and American Equity 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 American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cigna Corp and American Equity.
Diversification Opportunities for Cigna Corp and American Equity
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cigna and American is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cigna Corp and American Equity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Equity Inve 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 American Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Equity Inve has no effect on the direction of Cigna Corp i.e., Cigna Corp and American Equity go up and down completely randomly.
Pair Corralation between Cigna Corp and American Equity
Allowing for the 90-day total investment horizon Cigna Corp is expected to generate 2.58 times more return on investment than American Equity. However, Cigna Corp is 2.58 times more volatile than American Equity Investment. It trades about 0.07 of its potential returns per unit of risk. American Equity Investment is currently generating about 0.13 per unit of risk. If you would invest 33,585 in Cigna Corp on February 11, 2024 and sell it today you would earn a total of 1,254 from holding Cigna Corp or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 92.06% |
| Values | Daily Returns |
Cigna Corp vs. American Equity Investment
Performance |
| Timeline |
| Cigna Corp |
| American Equity Inve |
Cigna Corp and American Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cigna Corp and American Equity
The main advantage of trading using opposite Cigna Corp and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cigna Corp position performs unexpectedly, American Equity 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 American Equity will offset losses from the drop in American Equity's long position.The idea behind Cigna Corp and American Equity Investment 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.| American Equity vs. MetLife Preferred Stock | American Equity vs. National Western Life | American Equity vs. Prudential Public Limited | American Equity vs. MetLife Preferred Stock |
Check out your portfolio center.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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