Correlation Between Medical Properties and Cigna Corp

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

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

Diversification Opportunities for Medical Properties and Cigna Corp

0.81

Correlation Coefficient

Medical Properties  Cigna Corp

Very poor diversification

The 3 months correlation between Medical and Cigna is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Medical Properties 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 Medical Properties Trust 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 Medical Properties i.e., Medical Properties and Cigna Corp go up and down completely randomly.

Pair Corralation between Medical Properties and Cigna Corp

Considering the 90-day investment horizon Medical Properties Trust is expected to generate 9.01 times more return on investment than Cigna Corp. However, Medical Properties is 9.01 times more volatile than Cigna Corp. It trades about 0.1 of its potential returns per unit of risk. Cigna Corp is currently generating about -0.06 per unit of risk. If you would invest  440.00  in Medical Properties Trust on January 19, 2024 and sell it today you would earn a total of  47.00  from holding Medical Properties Trust or generate 10.68% return on investment over 90 days.

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

Medical Properties Trust  vs.  Cigna Corp

Medical Properties Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Properties Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Medical Properties showed solid returns over the last few months and may actually be approaching a breakup point.

Cigna Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cigna Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Cigna Corp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medical Properties and Cigna Corp

The main advantage of trading using opposite Medical Properties and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Properties 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 Medical Properties Trust 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..