Correlation Between Carnival PLC and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Carnival PLC 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 Carnival PLC and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carnival PLC and Cincinnati Financial Corp, you can compare the effects of market volatilities on Carnival PLC 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 Carnival PLC with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnival PLC and Cincinnati Financial.
Diversification Opportunities for Carnival PLC and Cincinnati Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Carnival and Cincinnati is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Carnival PLC and Cincinnati Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial Corp and Carnival PLC 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 Carnival PLC 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 Corp has no effect on the direction of Carnival PLC i.e., Carnival PLC and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Carnival PLC and Cincinnati Financial
Assuming the 90 days trading horizon Carnival PLC is expected to generate 1.44 times more return on investment than Cincinnati Financial. However, Carnival PLC is 1.44 times more volatile than Cincinnati Financial Corp. It trades about 0.09 of its potential returns per unit of risk. Cincinnati Financial Corp is currently generating about 0.06 per unit of risk. If you would invest 63,600 in Carnival PLC on September 4, 2024 and sell it today you would earn a total of 123,750 from holding Carnival PLC or generate 194.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 91.97% |
| Values | Daily Returns |
Carnival PLC vs. Cincinnati Financial Corp
Performance |
| Timeline |
| Carnival PLC |
| Cincinnati Financial Corp |
Carnival PLC and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carnival PLC and Cincinnati Financial
The main advantage of trading using opposite Carnival PLC and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnival PLC 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.| Carnival PLC vs. Darden Restaurants | Carnival PLC vs. Lendinvest PLC | Carnival PLC vs. Zoom Video Communications | Carnival PLC vs. Ameriprise Financial |
| Cincinnati Financial vs. GreenX Metals | Cincinnati Financial vs. Cornish Metals | Cincinnati Financial vs. Hochschild Mining plc | Cincinnati Financial vs. AMG Advanced Metallurgical |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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