Correlation Between Dow Jones and Cigna Corp
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Cigna Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Cigna Corp, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Cigna Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Cigna Corp.
Diversification Opportunities for Dow Jones and Cigna Corp
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Cigna is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Cigna Corp go up and down completely randomly.
Pair Corralation between Dow Jones and Cigna Corp
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.32 times less return on investment than Cigna Corp. But when comparing it to its historical volatility, Dow Jones Industrial is 2.09 times less risky than Cigna Corp. It trades about 0.15 of its potential returns per unit of risk. Cigna Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 31,757 in Cigna Corp on August 24, 2024 and sell it today you would earn a total of 1,250 from holding Cigna Corp or generate 3.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Cigna Corp
Performance |
| Timeline |
Dow Jones and Cigna Corp Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Cigna Corp
Pair trading matchups for Cigna Corp
Pair Trading with Dow Jones and Cigna Corp
The main advantage of trading using opposite Dow Jones and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Cigna Corp vs. Elevance Health | Cigna Corp vs. UnitedHealth Group Incorporated | Cigna Corp vs. Centene Corp | Cigna Corp vs. Molina Healthcare |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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