Correlation Between Cincinnati Financial and Gaming
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Gaming 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 Cincinnati Financial and Gaming into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial Corp and Gaming and Leisure, you can compare the effects of market volatilities on Cincinnati Financial and Gaming 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 Cincinnati Financial with a short position of Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Gaming.
Diversification Opportunities for Cincinnati Financial and Gaming
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cincinnati and Gaming is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Gaming and Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming and Leisure and Cincinnati Financial 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 Cincinnati Financial Corp are associated (or correlated) with Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming and Leisure has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Gaming go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Gaming
Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to under-perform the Gaming. But the stock apears to be less risky and, when comparing its historical volatility, Cincinnati Financial Corp is 1.23 times less risky than Gaming. The stock trades about -0.24 of its potential returns per unit of risk. The Gaming and Leisure is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 4,700 in Gaming and Leisure on October 12, 2024 and sell it today you would lose (143.00) from holding Gaming and Leisure or give up 3.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. Gaming and Leisure
Performance |
| Timeline |
| Cincinnati Financial Corp |
| Gaming and Leisure |
Cincinnati Financial and Gaming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Gaming
The main advantage of trading using opposite Cincinnati Financial and Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Gaming 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 Gaming will offset losses from the drop in Gaming's long position.| Cincinnati Financial vs. COMPUTERSHARE | Cincinnati Financial vs. Rocket Internet SE | Cincinnati Financial vs. Entravision Communications | Cincinnati Financial vs. Grand Canyon Education |
| Gaming vs. Singapore Airlines Limited | Gaming vs. Cars Inc | Gaming vs. CARSALESCOM | Gaming vs. SOUTHWEST AIRLINES |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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