Correlation Between Cigna Corp and Patterson Companies

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

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

Diversification Opportunities for Cigna Corp and Patterson Companies

-0.62

Correlation Coefficient

Cigna Corp  Patterson Companies

Excellent diversification

The 3 months correlation between Cigna and Patterson is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cigna Corp and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Cigna Corp i.e., Cigna Corp and Patterson Companies go up and down completely randomly.

Pair Corralation between Cigna Corp and Patterson Companies

Allowing for the 90-day total investment horizon Cigna Corp is expected to under-perform the Patterson Companies. But the stock apears to be less risky and, when comparing its historical volatility, Cigna Corp is 2.59 times less risky than Patterson Companies. The stock trades about -0.23 of its potential returns per unit of risk. The Patterson Companies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,169  in Patterson Companies on September 18, 2024 and sell it today you would earn a total of  926.00  from holding Patterson Companies or generate 42.69% return on investment over 90 days.

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

Cigna Corp  vs.  Patterson Companies

Cigna Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cigna Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Patterson Companies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Patterson Companies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cigna Corp and Patterson Companies

The main advantage of trading using opposite Cigna Corp and Patterson Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cigna Corp position performs unexpectedly, Patterson Companies 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 Patterson Companies will offset losses from the drop in Patterson Companies' long position.

The idea behind Cigna Corp and Patterson Companies 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..