Correlation Between Cincinnati Financial and WESTERN DIGITAL
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and WESTERN DIGITAL 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 WESTERN DIGITAL 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 WESTERN DIGITAL, you can compare the effects of market volatilities on Cincinnati Financial and WESTERN DIGITAL 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 WESTERN DIGITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and WESTERN DIGITAL.
Diversification Opportunities for Cincinnati Financial and WESTERN DIGITAL
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cincinnati and WESTERN is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL 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 WESTERN DIGITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN DIGITAL has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and WESTERN DIGITAL go up and down completely randomly.
Pair Corralation between Cincinnati Financial and WESTERN DIGITAL
Assuming the 90 days trading horizon Cincinnati Financial is expected to generate 1.44 times less return on investment than WESTERN DIGITAL. But when comparing it to its historical volatility, Cincinnati Financial Corp is 1.79 times less risky than WESTERN DIGITAL. It trades about 0.07 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,546 in WESTERN DIGITAL on October 14, 2024 and sell it today you would earn a total of 2,581 from holding WESTERN DIGITAL or generate 72.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. WESTERN DIGITAL
Performance |
| Timeline |
| Cincinnati Financial Corp |
| WESTERN DIGITAL |
Cincinnati Financial and WESTERN DIGITAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and WESTERN DIGITAL
The main advantage of trading using opposite Cincinnati Financial and WESTERN DIGITAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, WESTERN DIGITAL 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 WESTERN DIGITAL will offset losses from the drop in WESTERN DIGITAL's long position.| Cincinnati Financial vs. Apple Inc | Cincinnati Financial vs. Apple Inc | Cincinnati Financial vs. Apple Inc | Cincinnati Financial vs. Apple Inc |
| WESTERN DIGITAL vs. UNIQA INSURANCE GR | WESTERN DIGITAL vs. ULTRA CLEAN HLDGS | WESTERN DIGITAL vs. Cincinnati Financial Corp | WESTERN DIGITAL vs. SUN LIFE 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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