Correlation Between Cincinnati Financial and MGIC Investment
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and MGIC Investment 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 MGIC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and MGIC Investment Corp, you can compare the effects of market volatilities on Cincinnati Financial and MGIC Investment 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 MGIC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and MGIC Investment.
Diversification Opportunities for Cincinnati Financial and MGIC Investment
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cincinnati and MGIC is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and MGIC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC Investment Corp 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 MGIC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC Investment Corp has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and MGIC Investment go up and down completely randomly.
Pair Corralation between Cincinnati Financial and MGIC Investment
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.35 times more return on investment than MGIC Investment. However, Cincinnati Financial is 1.35 times more volatile than MGIC Investment Corp. It trades about -0.01 of its potential returns per unit of risk. MGIC Investment Corp is currently generating about -0.22 per unit of risk. If you would invest 14,089 in Cincinnati Financial on November 28, 2024 and sell it today you would lose (95.00) from holding Cincinnati Financial or give up 0.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. MGIC Investment Corp
Performance |
| Timeline |
| Cincinnati Financial |
| MGIC Investment Corp |
Cincinnati Financial and MGIC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and MGIC Investment
The main advantage of trading using opposite Cincinnati Financial and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, MGIC Investment 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 MGIC Investment will offset losses from the drop in MGIC Investment's long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
| MGIC Investment vs. MBIA Inc | MGIC Investment vs. NMI Holdings | MGIC Investment vs. Essent Group | MGIC Investment vs. Assured Guaranty |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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