Correlation Between Cincinnati Financial and Better Home
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Better Home 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 Better Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and Better Home Finance, you can compare the effects of market volatilities on Cincinnati Financial and Better Home 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 Better Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Better Home.
Diversification Opportunities for Cincinnati Financial and Better Home
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cincinnati and Better is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Better Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Home Finance 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 Better Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Home Finance has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Better Home go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Better Home
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 73.19 times less return on investment than Better Home. But when comparing it to its historical volatility, Cincinnati Financial is 11.5 times less risky than Better Home. It trades about 0.04 of its potential returns per unit of risk. Better Home Finance is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Better Home Finance on September 14, 2024 and sell it today you would earn a total of 3.00 from holding Better Home Finance or generate 37.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 52.38% |
| Values | Daily Returns |
Cincinnati Financial vs. Better Home Finance
Performance |
| Timeline |
| Cincinnati Financial |
| Better Home Finance |
Cincinnati Financial and Better Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Better Home
The main advantage of trading using opposite Cincinnati Financial and Better Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Better Home 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 Better Home will offset losses from the drop in Better Home's long position.| Cincinnati Financial vs. W R Berkley | Cincinnati Financial vs. Markel | Cincinnati Financial vs. RLI Corp | Cincinnati Financial vs. CNA Financial |
| Better Home vs. Cincinnati Financial | Better Home vs. Trupanion | Better Home vs. ICC Holdings | Better Home vs. Stepstone Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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