Correlation Between Cincinnati Financial and International Consolidated
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and International Consolidated 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 International Consolidated 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 International Consolidated Airlines, you can compare the effects of market volatilities on Cincinnati Financial and International Consolidated 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 International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and International Consolidated.
Diversification Opportunities for Cincinnati Financial and International Consolidated
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cincinnati and International is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and International Consolidated go up and down completely randomly.
Pair Corralation between Cincinnati Financial and International Consolidated
Assuming the 90 days trading horizon Cincinnati Financial is expected to generate 1.52 times less return on investment than International Consolidated. In addition to that, Cincinnati Financial is 1.04 times more volatile than International Consolidated Airlines. It trades about 0.31 of its total potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.5 per unit of volatility. If you would invest 21,370 in International Consolidated Airlines on September 4, 2024 and sell it today you would earn a total of 4,810 from holding International Consolidated Airlines or generate 22.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. International Consolidated Air
Performance |
| Timeline |
| Cincinnati Financial Corp |
| International Consolidated |
Cincinnati Financial and International Consolidated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and International Consolidated
The main advantage of trading using opposite Cincinnati Financial and International Consolidated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, International Consolidated 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 International Consolidated will offset losses from the drop in International Consolidated's long position.| Cincinnati Financial vs. GreenX Metals | Cincinnati Financial vs. Cornish Metals | Cincinnati Financial vs. Hochschild Mining plc | Cincinnati Financial vs. AMG Advanced Metallurgical |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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