Correlation Between Cincinnati Financial and Avadel Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Avadel Pharmaceuticals 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 Avadel Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and Avadel Pharmaceuticals PLC, you can compare the effects of market volatilities on Cincinnati Financial and Avadel Pharmaceuticals 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 Avadel Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Avadel Pharmaceuticals.
Diversification Opportunities for Cincinnati Financial and Avadel Pharmaceuticals
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cincinnati and Avadel is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Avadel Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avadel Pharmaceuticals 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 are associated (or correlated) with Avadel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avadel Pharmaceuticals has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Avadel Pharmaceuticals go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Avadel Pharmaceuticals
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.27 times less return on investment than Avadel Pharmaceuticals. But when comparing it to its historical volatility, Cincinnati Financial is 2.43 times less risky than Avadel Pharmaceuticals. It trades about 0.07 of its potential returns per unit of risk. Avadel Pharmaceuticals PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 824.00 in Avadel Pharmaceuticals PLC on September 3, 2024 and sell it today you would earn a total of 282.00 from holding Avadel Pharmaceuticals PLC or generate 34.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. Avadel Pharmaceuticals PLC
Performance |
| Timeline |
| Cincinnati Financial |
| Avadel Pharmaceuticals |
Cincinnati Financial and Avadel Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Avadel Pharmaceuticals
The main advantage of trading using opposite Cincinnati Financial and Avadel Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Avadel Pharmaceuticals 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 Avadel Pharmaceuticals will offset losses from the drop in Avadel Pharmaceuticals' long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
| Avadel Pharmaceuticals vs. Neurocrine Biosciences | Avadel Pharmaceuticals vs. Ironwood Pharmaceuticals | Avadel Pharmaceuticals vs. Alkermes Plc | Avadel Pharmaceuticals vs. Intracellular Th |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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