Correlation Between Sumitomo Mitsui and Cigna
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Cigna 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 Sumitomo Mitsui and Cigna into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Financial and Cigna, you can compare the effects of market volatilities on Sumitomo Mitsui and Cigna 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 Sumitomo Mitsui with a short position of Cigna. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Cigna.
Diversification Opportunities for Sumitomo Mitsui and Cigna
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sumitomo and Cigna is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Cigna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna and Sumitomo Mitsui 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 Sumitomo Mitsui Financial are associated (or correlated) with Cigna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cigna has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Cigna go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Cigna
Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 1.32 times more return on investment than Cigna. However, Sumitomo Mitsui is 1.32 times more volatile than Cigna. It trades about 0.1 of its potential returns per unit of risk. Cigna is currently generating about 0.02 per unit of risk. If you would invest 3,520 in Sumitomo Mitsui Financial on August 31, 2024 and sell it today you would earn a total of 4,892 from holding Sumitomo Mitsui Financial or generate 138.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. Cigna
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Cigna |
Sumitomo Mitsui and Cigna Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Cigna
The main advantage of trading using opposite Sumitomo Mitsui and Cigna positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Cigna 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 will offset losses from the drop in Cigna's long position.| Sumitomo Mitsui vs. Mitsubishi UFJ Financial | Sumitomo Mitsui vs. Fras le SA | Sumitomo Mitsui vs. Western Digital | Sumitomo Mitsui vs. Energisa SA |
| Cigna vs. NXP Semiconductors NV | Cigna vs. Sumitomo Mitsui Financial | Cigna vs. Mitsubishi UFJ Financial | Cigna vs. Bread Financial Holdings |
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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