Correlation Between Cincinnati Financial and CDN IMPERIAL
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and CDN IMPERIAL 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 CDN IMPERIAL 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 CDN IMPERIAL BANK, you can compare the effects of market volatilities on Cincinnati Financial and CDN IMPERIAL 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 CDN IMPERIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and CDN IMPERIAL.
Diversification Opportunities for Cincinnati Financial and CDN IMPERIAL
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cincinnati and CDN is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK 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 CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and CDN IMPERIAL go up and down completely randomly.
Pair Corralation between Cincinnati Financial and CDN IMPERIAL
Assuming the 90 days trading horizon Cincinnati Financial is expected to generate 1.43 times less return on investment than CDN IMPERIAL. In addition to that, Cincinnati Financial is 1.15 times more volatile than CDN IMPERIAL BANK. It trades about 0.1 of its total potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about 0.16 per unit of volatility. If you would invest 4,270 in CDN IMPERIAL BANK on October 12, 2024 and sell it today you would earn a total of 1,853 from holding CDN IMPERIAL BANK or generate 43.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. CDN IMPERIAL BANK
Performance |
| Timeline |
| Cincinnati Financial Corp |
| CDN IMPERIAL BANK |
Cincinnati Financial and CDN IMPERIAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and CDN IMPERIAL
The main advantage of trading using opposite Cincinnati Financial and CDN IMPERIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, CDN IMPERIAL 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 CDN IMPERIAL will offset losses from the drop in CDN IMPERIAL's long position.| Cincinnati Financial vs. COMPUTERSHARE | Cincinnati Financial vs. Rocket Internet SE | Cincinnati Financial vs. Entravision Communications | Cincinnati Financial vs. Grand Canyon Education |
| CDN IMPERIAL vs. CITIC Telecom International | CDN IMPERIAL vs. Canon Marketing Japan | CDN IMPERIAL vs. FAST RETAIL ADR | CDN IMPERIAL vs. Tencent Music Entertainment |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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