Correlation Between Aeorema Communications and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Aeorema Communications 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 Aeorema Communications and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeorema Communications Plc and Cincinnati Financial Corp, you can compare the effects of market volatilities on Aeorema Communications 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 Aeorema Communications with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and Cincinnati Financial.
Diversification Opportunities for Aeorema Communications and Cincinnati Financial
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aeorema and Cincinnati is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc 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 Aeorema Communications 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 Aeorema Communications Plc 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 Aeorema Communications i.e., Aeorema Communications and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Aeorema Communications and Cincinnati Financial
Assuming the 90 days trading horizon Aeorema Communications is expected to generate 2.1 times less return on investment than Cincinnati Financial. But when comparing it to its historical volatility, Aeorema Communications Plc is 1.4 times less risky than Cincinnati Financial. It trades about 0.18 of its potential returns per unit of risk. 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aeorema Communications Plc vs. Cincinnati Financial Corp
Performance |
| Timeline |
| Aeorema Communications |
| Cincinnati Financial Corp |
Aeorema Communications and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeorema Communications and Cincinnati Financial
The main advantage of trading using opposite Aeorema Communications and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications 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.| Aeorema Communications vs. Samsung Electronics Co | Aeorema Communications vs. Samsung Electronics Co | Aeorema Communications vs. Hyundai Motor | Aeorema Communications vs. Toyota Motor Corp |
| 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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