Correlation Between Cincinnati Financial and Fannie Mae
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Fannie Mae 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 Fannie Mae 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 Fannie Mae, you can compare the effects of market volatilities on Cincinnati Financial and Fannie Mae 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 Fannie Mae. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Fannie Mae.
Diversification Opportunities for Cincinnati Financial and Fannie Mae
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cincinnati and Fannie is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Fannie Mae in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fannie Mae 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 Fannie Mae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fannie Mae has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Fannie Mae go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Fannie Mae
Assuming the 90 days trading horizon Cincinnati Financial is expected to generate 7.73 times less return on investment than Fannie Mae. But when comparing it to its historical volatility, Cincinnati Financial Corp is 3.15 times less risky than Fannie Mae. It trades about 0.05 of its potential returns per unit of risk. Fannie Mae is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 44.00 in Fannie Mae on August 24, 2024 and sell it today you would earn a total of 278.00 from holding Fannie Mae or generate 631.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 65.57% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. Fannie Mae
Performance |
| Timeline |
| Cincinnati Financial Corp |
| Fannie Mae |
Cincinnati Financial and Fannie Mae Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Fannie Mae
The main advantage of trading using opposite Cincinnati Financial and Fannie Mae positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Fannie Mae 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 Fannie Mae will offset losses from the drop in Fannie Mae's long position.| Cincinnati Financial vs. Verizon Communications | Cincinnati Financial vs. Batm Advanced Communications | Cincinnati Financial vs. Axway Software SA | Cincinnati Financial vs. Charter Communications Cl |
| Fannie Mae vs. Microchip Technology | Fannie Mae vs. Schweiter Technologies AG | Fannie Mae vs. Discover Financial Services | Fannie Mae vs. Infrastrutture Wireless Italiane |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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