Correlation Between Better Home and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Better Home 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 Better Home and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Better Home Finance and Cincinnati Financial, you can compare the effects of market volatilities on Better Home 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 Better Home with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Better Home and Cincinnati Financial.
Diversification Opportunities for Better Home and Cincinnati Financial
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Better and Cincinnati is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Better Home Finance and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Better Home 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 Better Home Finance 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 Better Home i.e., Better Home and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Better Home and Cincinnati Financial
Assuming the 90 days horizon Better Home Finance is expected to generate 16.86 times more return on investment than Cincinnati Financial. However, Better Home is 16.86 times more volatile than Cincinnati Financial. It trades about 0.09 of its potential returns per unit of risk. Cincinnati Financial is currently generating about 0.13 per unit of risk. If you would invest 9.80 in Better Home Finance on September 14, 2024 and sell it today you would lose (1.80) from holding Better Home Finance or give up 18.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 68.77% |
| Values | Daily Returns |
Better Home Finance vs. Cincinnati Financial
Performance |
| Timeline |
| Better Home Finance |
| Cincinnati Financial |
Better Home and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Better Home and Cincinnati Financial
The main advantage of trading using opposite Better Home and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Better Home 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.| Better Home vs. Cincinnati Financial | Better Home vs. Trupanion | Better Home vs. ICC Holdings | Better Home vs. Stepstone Group |
| Cincinnati Financial vs. W R Berkley | Cincinnati Financial vs. Markel | Cincinnati Financial vs. RLI Corp | Cincinnati Financial vs. CNA Financial |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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