Correlation Between Cincinnati Financial and Leggett Platt
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Leggett Platt 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 Leggett Platt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and Leggett Platt Incorporated, you can compare the effects of market volatilities on Cincinnati Financial and Leggett Platt 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 Leggett Platt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Leggett Platt.
Diversification Opportunities for Cincinnati Financial and Leggett Platt
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cincinnati and Leggett is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Leggett Platt Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leggett Platt 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 Leggett Platt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leggett Platt has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Leggett Platt go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Leggett Platt
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 0.63 times more return on investment than Leggett Platt. However, Cincinnati Financial is 1.59 times less risky than Leggett Platt. It trades about 0.06 of its potential returns per unit of risk. Leggett Platt Incorporated is currently generating about -0.07 per unit of risk. If you would invest 10,208 in Cincinnati Financial on August 24, 2024 and sell it today you would earn a total of 5,439 from holding Cincinnati Financial or generate 53.28% 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. Leggett Platt Incorporated
Performance |
| Timeline |
| Cincinnati Financial |
| Leggett Platt |
Cincinnati Financial and Leggett Platt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Leggett Platt
The main advantage of trading using opposite Cincinnati Financial and Leggett Platt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Leggett Platt 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 Leggett Platt will offset losses from the drop in Leggett Platt's long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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