Correlation Between Cincinnati Financial and Reckitt Benckiser
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Reckitt Benckiser 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 Reckitt Benckiser 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 Reckitt Benckiser Group, you can compare the effects of market volatilities on Cincinnati Financial and Reckitt Benckiser 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 Reckitt Benckiser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Reckitt Benckiser.
Diversification Opportunities for Cincinnati Financial and Reckitt Benckiser
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cincinnati and Reckitt is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser 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 Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Reckitt Benckiser go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Reckitt Benckiser
Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to under-perform the Reckitt Benckiser. In addition to that, Cincinnati Financial is 1.52 times more volatile than Reckitt Benckiser Group. It trades about -0.26 of its total potential returns per unit of risk. Reckitt Benckiser Group is currently generating about 0.11 per unit of volatility. If you would invest 473,800 in Reckitt Benckiser Group on October 9, 2024 and sell it today you would earn a total of 7,100 from holding Reckitt Benckiser Group or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. Reckitt Benckiser Group
Performance |
| Timeline |
| Cincinnati Financial Corp |
| Reckitt Benckiser |
Cincinnati Financial and Reckitt Benckiser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Reckitt Benckiser
The main advantage of trading using opposite Cincinnati Financial and Reckitt Benckiser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Reckitt Benckiser 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 Reckitt Benckiser will offset losses from the drop in Reckitt Benckiser's long position.| Cincinnati Financial vs. Fevertree Drinks Plc | Cincinnati Financial vs. JPMorgan Japanese Investment | Cincinnati Financial vs. Universal Music Group | Cincinnati Financial vs. Alliance Data Systems |
| Reckitt Benckiser vs. Batm Advanced Communications | Reckitt Benckiser vs. Spirent Communications plc | Reckitt Benckiser vs. Gamma Communications PLC | Reckitt Benckiser vs. Telecom Italia SpA |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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