Correlation Between West Pharmaceutical and Cigna Corp
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical 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 West Pharmaceutical and Cigna Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West Pharmaceutical Services and Cigna Corp, you can compare the effects of market volatilities on West Pharmaceutical 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 West Pharmaceutical with a short position of Cigna Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and Cigna Corp.
Diversification Opportunities for West Pharmaceutical and Cigna Corp
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between West and Cigna is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and West Pharmaceutical 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 West Pharmaceutical Services 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 West Pharmaceutical i.e., West Pharmaceutical and Cigna Corp go up and down completely randomly.
Pair Corralation between West Pharmaceutical and Cigna Corp
Considering the 90-day investment horizon West Pharmaceutical Services is expected to generate 1.5 times more return on investment than Cigna Corp. However, West Pharmaceutical is 1.5 times more volatile than Cigna Corp. It trades about 0.02 of its potential returns per unit of risk. Cigna Corp is currently generating about -0.07 per unit of risk. If you would invest 32,326 in West Pharmaceutical Services on September 24, 2024 and sell it today you would earn a total of 631.00 from holding West Pharmaceutical Services or generate 1.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
West Pharmaceutical Services vs. Cigna Corp
Performance |
Timeline |
West Pharmaceutical |
Cigna Corp |
West Pharmaceutical and Cigna Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with West Pharmaceutical and Cigna Corp
The main advantage of trading using opposite West Pharmaceutical and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical 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.West Pharmaceutical vs. Cigna Corp | West Pharmaceutical vs. Definitive Healthcare Corp | West Pharmaceutical vs. Guardant Health | West Pharmaceutical vs. Laboratory of |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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