Correlation Between Astar and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Astar 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 Astar and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Astar and Cincinnati Financial, you can compare the effects of market volatilities on Astar 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 Astar with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and Cincinnati Financial.
Diversification Opportunities for Astar and Cincinnati Financial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Astar and Cincinnati is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Astar 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 Astar 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 has no effect on the direction of Astar i.e., Astar and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Astar and Cincinnati Financial
Assuming the 90 days trading horizon Astar is expected to generate 3.83 times more return on investment than Cincinnati Financial. However, Astar is 3.83 times more volatile than Cincinnati Financial. It trades about 0.05 of its potential returns per unit of risk. Cincinnati Financial is currently generating about 0.07 per unit of risk. If you would invest 6.20 in Astar on October 20, 2024 and sell it today you would earn a total of 0.16 from holding Astar or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.82% |
| Values | Daily Returns |
Astar vs. Cincinnati Financial
Performance |
| Timeline |
| Astar |
| Cincinnati Financial |
Astar and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Astar and Cincinnati Financial
The main advantage of trading using opposite Astar and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astar 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.The idea behind Astar and Cincinnati Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Cincinnati Financial vs. THAI BEVERAGE | Cincinnati Financial vs. DICKS Sporting Goods | Cincinnati Financial vs. Jacquet Metal Service | Cincinnati Financial vs. Transport International Holdings |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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