Correlation Between Cincinnati Financial and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and NMI Holdings 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 NMI Holdings 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 NMI Holdings, you can compare the effects of market volatilities on Cincinnati Financial and NMI Holdings 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 NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and NMI Holdings.
Diversification Opportunities for Cincinnati Financial and NMI Holdings
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cincinnati and NMI is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings 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 NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and NMI Holdings go up and down completely randomly.
Pair Corralation between Cincinnati Financial and NMI Holdings
Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 0.65 times more return on investment than NMI Holdings. However, Cincinnati Financial Corp is 1.55 times less risky than NMI Holdings. It trades about -0.26 of its potential returns per unit of risk. NMI Holdings is currently generating about -0.18 per unit of risk. If you would invest 14,411 in Cincinnati Financial Corp on October 13, 2024 and sell it today you would lose (686.00) from holding Cincinnati Financial Corp or give up 4.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. NMI Holdings
Performance |
| Timeline |
| Cincinnati Financial Corp |
| NMI Holdings |
Cincinnati Financial and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and NMI Holdings
The main advantage of trading using opposite Cincinnati Financial and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, NMI Holdings 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 NMI Holdings will offset losses from the drop in NMI Holdings' long position.| Cincinnati Financial vs. Apple Inc | Cincinnati Financial vs. Apple Inc | Cincinnati Financial vs. Apple Inc | Cincinnati Financial vs. Apple Inc |
| NMI Holdings vs. REVO INSURANCE SPA | NMI Holdings vs. Quaker Chemical | NMI Holdings vs. Cincinnati Financial Corp | NMI Holdings vs. Erste Group Bank |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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