Correlation Between Cincinnati Financial and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Ally 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 Cincinnati Financial and Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial Corp and Ally Financial, you can compare the effects of market volatilities on Cincinnati Financial and Ally 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 Cincinnati Financial with a short position of Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Ally Financial.
Diversification Opportunities for Cincinnati Financial and Ally Financial
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cincinnati and Ally is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Cincinnati Financial 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 Cincinnati Financial Corp are associated (or correlated) with Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Ally Financial go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Ally Financial
Assuming the 90 days trading horizon Cincinnati Financial is expected to generate 1.31 times less return on investment than Ally Financial. But when comparing it to its historical volatility, Cincinnati Financial Corp is 1.13 times less risky than Ally Financial. It trades about 0.22 of its potential returns per unit of risk. Ally Financial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,463 in Ally Financial on August 28, 2024 and sell it today you would earn a total of 436.00 from holding Ally Financial or generate 12.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. Ally Financial
Performance |
| Timeline |
| Cincinnati Financial Corp |
| Ally Financial |
Cincinnati Financial and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Ally Financial
The main advantage of trading using opposite Cincinnati Financial and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Ally 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 Ally Financial will offset losses from the drop in Ally Financial's long position.| Cincinnati Financial vs. Samsung Electronics Co | Cincinnati Financial vs. Samsung Electronics Co | Cincinnati Financial vs. Hyundai Motor | Cincinnati Financial vs. Toyota Motor Corp |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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