Correlation Between Becton Dickinson and Cigna Corp

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

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

Diversification Opportunities for Becton Dickinson and Cigna Corp

0.33

Correlation Coefficient

Becton Dickinson  Cigna Corp

Weak diversification

The 3 months correlation between Becton and Cigna is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Becton Dickinson and and Cigna Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cigna Corp and Becton Dickinson 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 Becton Dickinson and 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 Becton Dickinson i.e., Becton Dickinson and Cigna Corp go up and down completely randomly.

Pair Corralation between Becton Dickinson and Cigna Corp

Considering the 90-day investment horizon Becton Dickinson and is expected to under-perform the Cigna Corp. In addition to that, Becton Dickinson is 1.81 times more volatile than Cigna Corp. It trades about -0.22 of its total potential returns per unit of risk. Cigna Corp is currently generating about -0.21 per unit of volatility. If you would invest  36,408  in Cigna Corp on January 29, 2024 and sell it today you would lose (961.00) from holding Cigna Corp or give up 2.64% of portfolio value over 90 days.

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

Becton Dickinson and  vs.  Cigna Corp

Becton Dickinson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Becton Dickinson and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Becton Dickinson is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cigna Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cigna Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal forward indicators, Cigna Corp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Becton Dickinson and Cigna Corp

The main advantage of trading using opposite Becton Dickinson and Cigna Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Becton Dickinson 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 Becton Dickinson and 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.