Correlation Between Alliance Data and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Alliance Data and Cincinnati Financial 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 Alliance Data and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Data Systems and Cincinnati Financial Corp, you can compare the effects of market volatilities on Alliance Data and Cincinnati Financial 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 Alliance Data with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Cincinnati Financial.
Diversification Opportunities for Alliance Data and Cincinnati Financial
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Alliance and Cincinnati is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Cincinnati Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial Corp and Alliance Data 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 Alliance Data Systems are associated (or correlated) with Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial Corp has no effect on the direction of Alliance Data i.e., Alliance Data and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Alliance Data and Cincinnati Financial
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.5 times more return on investment than Cincinnati Financial. However, Alliance Data is 1.5 times more volatile than Cincinnati Financial Corp. It trades about 0.09 of its potential returns per unit of risk. Cincinnati Financial Corp is currently generating about -0.13 per unit of risk. If you would invest 6,289 in Alliance Data Systems on October 25, 2024 and sell it today you would earn a total of 189.00 from holding Alliance Data Systems or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 78.95% |
| Values | Daily Returns |
Alliance Data Systems vs. Cincinnati Financial Corp
Performance |
| Timeline |
| Alliance Data Systems |
| Cincinnati Financial Corp |
Alliance Data and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and Cincinnati Financial
The main advantage of trading using opposite Alliance Data and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, Cincinnati Financial 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.| Alliance Data vs. Toyota Motor Corp | Alliance Data vs. SoftBank Group Corp | Alliance Data vs. OTP Bank Nyrt | Alliance Data vs. ONEOK Inc |
| Cincinnati Financial vs. Erste Group Bank | Cincinnati Financial vs. Check Point Software | Cincinnati Financial vs. Software Circle plc | Cincinnati Financial vs. Vitec Software Group |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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