Correlation Between Henkel AG and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Henkel AG and Cincinnati 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 Henkel AG and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Henkel AG Co and Cincinnati Financial Corp, you can compare the effects of market volatilities on Henkel AG and Cincinnati 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 Henkel AG with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henkel AG and Cincinnati Financial.
Diversification Opportunities for Henkel AG and Cincinnati Financial
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Henkel and Cincinnati is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Henkel AG Co and Cincinnati Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial Corp and Henkel AG 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 Henkel AG Co are associated (or correlated) with Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial Corp has no effect on the direction of Henkel AG i.e., Henkel AG and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Henkel AG and Cincinnati Financial
Assuming the 90 days trading horizon Henkel AG Co is expected to under-perform the Cincinnati Financial. But the stock apears to be less risky and, when comparing its historical volatility, Henkel AG Co is 1.74 times less risky than Cincinnati Financial. The stock trades about 0.0 of its potential returns per unit of risk. The Cincinnati Financial Corp is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 14,144 in Cincinnati Financial Corp on September 2, 2024 and sell it today you would earn a total of 1,788 from holding Cincinnati Financial Corp or generate 12.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Henkel AG Co vs. Cincinnati Financial Corp
Performance |
| Timeline |
| Henkel AG |
| Cincinnati Financial Corp |
Henkel AG and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Henkel AG and Cincinnati Financial
The main advantage of trading using opposite Henkel AG and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henkel AG position performs unexpectedly, Cincinnati 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.| Henkel AG vs. International Consolidated Airlines | Henkel AG vs. Spirent Communications plc | Henkel AG vs. Smithson Investment Trust | Henkel AG vs. Aeorema Communications Plc |
| Cincinnati Financial vs. Uniper SE | Cincinnati Financial vs. Mulberry Group PLC | Cincinnati Financial vs. London Security Plc | Cincinnati Financial vs. Triad Group PLC |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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