Correlation Between Cincinnati Financial and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Diageo PLC 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 Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and Diageo PLC ADR, you can compare the effects of market volatilities on Cincinnati Financial and Diageo PLC 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 Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Diageo PLC.
Diversification Opportunities for Cincinnati Financial and Diageo PLC
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cincinnati and Diageo is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Diageo PLC go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Diageo PLC
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.14 times more return on investment than Diageo PLC. However, Cincinnati Financial is 1.14 times more volatile than Diageo PLC ADR. It trades about 0.07 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.05 per unit of risk. If you would invest 10,182 in Cincinnati Financial on September 3, 2024 and sell it today you would earn a total of 5,801 from holding Cincinnati Financial or generate 56.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. Diageo PLC ADR
Performance |
| Timeline |
| Cincinnati Financial |
| Diageo PLC ADR |
Cincinnati Financial and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Diageo PLC
The main advantage of trading using opposite Cincinnati Financial and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Diageo PLC 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 Diageo PLC will offset losses from the drop in Diageo PLC's long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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