Correlation Between Cincinnati Financial and Anheuser Busch
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Anheuser Busch 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 Anheuser Busch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and Anheuser Busch Inbev, you can compare the effects of market volatilities on Cincinnati Financial and Anheuser Busch 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 Anheuser Busch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Anheuser Busch.
Diversification Opportunities for Cincinnati Financial and Anheuser Busch
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cincinnati and Anheuser is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev 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 Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Anheuser Busch go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Anheuser Busch
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.29 times more return on investment than Anheuser Busch. However, Cincinnati Financial is 1.29 times more volatile than Anheuser Busch Inbev. It trades about 0.26 of its potential returns per unit of risk. Anheuser Busch Inbev is currently generating about -0.5 per unit of risk. If you would invest 14,449 in Cincinnati Financial on August 27, 2024 and sell it today you would earn a total of 1,493 from holding Cincinnati Financial or generate 10.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. Anheuser Busch Inbev
Performance |
| Timeline |
| Cincinnati Financial |
| Anheuser Busch Inbev |
Cincinnati Financial and Anheuser Busch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Anheuser Busch
The main advantage of trading using opposite Cincinnati Financial and Anheuser Busch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Anheuser Busch 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 Anheuser Busch will offset losses from the drop in Anheuser Busch's long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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