Correlation Between Avadel Pharmaceuticals and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Avadel Pharmaceuticals 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 Avadel Pharmaceuticals and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avadel Pharmaceuticals PLC and Cincinnati Financial, you can compare the effects of market volatilities on Avadel Pharmaceuticals 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 Avadel Pharmaceuticals with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avadel Pharmaceuticals and Cincinnati Financial.
Diversification Opportunities for Avadel Pharmaceuticals and Cincinnati Financial
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Avadel and Cincinnati is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Avadel Pharmaceuticals PLC and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Avadel Pharmaceuticals 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 Avadel Pharmaceuticals 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 has no effect on the direction of Avadel Pharmaceuticals i.e., Avadel Pharmaceuticals and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Avadel Pharmaceuticals and Cincinnati Financial
Given the investment horizon of 90 days Avadel Pharmaceuticals PLC is expected to generate 2.43 times more return on investment than Cincinnati Financial. However, Avadel Pharmaceuticals is 2.43 times more volatile than Cincinnati Financial. It trades about 0.03 of its potential returns per unit of risk. Cincinnati Financial is currently generating about 0.07 per unit of risk. If you would invest 824.00 in Avadel Pharmaceuticals PLC on September 3, 2024 and sell it today you would earn a total of 282.00 from holding Avadel Pharmaceuticals PLC or generate 34.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avadel Pharmaceuticals PLC vs. Cincinnati Financial
Performance |
| Timeline |
| Avadel Pharmaceuticals |
| Cincinnati Financial |
Avadel Pharmaceuticals and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avadel Pharmaceuticals and Cincinnati Financial
The main advantage of trading using opposite Avadel Pharmaceuticals and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avadel Pharmaceuticals 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.| Avadel Pharmaceuticals vs. Neurocrine Biosciences | Avadel Pharmaceuticals vs. Ironwood Pharmaceuticals | Avadel Pharmaceuticals vs. Alkermes Plc | Avadel Pharmaceuticals vs. Intracellular Th |
| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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