Correlation Between Cincinnati Financial and Universal Music
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Universal Music 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 Universal Music 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 Universal Music Group, you can compare the effects of market volatilities on Cincinnati Financial and Universal Music 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 Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Universal Music.
Diversification Opportunities for Cincinnati Financial and Universal Music
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cincinnati and Universal is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Universal Music go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Universal Music
Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to under-perform the Universal Music. In addition to that, Cincinnati Financial is 1.06 times more volatile than Universal Music Group. It trades about -0.01 of its total potential returns per unit of risk. Universal Music Group is currently generating about 0.2 per unit of volatility. If you would invest 2,302 in Universal Music Group on September 13, 2024 and sell it today you would earn a total of 113.00 from holding Universal Music Group or generate 4.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. Universal Music Group
Performance |
| Timeline |
| Cincinnati Financial Corp |
| Universal Music Group |
Cincinnati Financial and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Universal Music
The main advantage of trading using opposite Cincinnati Financial and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Universal Music 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 Universal Music will offset losses from the drop in Universal Music's long position.| Cincinnati Financial vs. Discover Financial Services | Cincinnati Financial vs. Ally Financial | Cincinnati Financial vs. OneSavings Bank PLC | Cincinnati Financial vs. Aeorema Communications Plc |
| Universal Music vs. Hochschild Mining plc | Universal Music vs. Sparebank 1 SR | Universal Music vs. Prudential Financial | Universal Music vs. McEwen Mining |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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