Correlation Between Cincinnati Financial and RLI Corp
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and RLI Corp 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 RLI Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and RLI Corp, you can compare the effects of market volatilities on Cincinnati Financial and RLI Corp 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 RLI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and RLI Corp.
Diversification Opportunities for Cincinnati Financial and RLI Corp
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cincinnati and RLI is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and RLI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLI 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 RLI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLI Corp has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and RLI Corp go up and down completely randomly.
Pair Corralation between Cincinnati Financial and RLI Corp
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.25 times less return on investment than RLI Corp. In addition to that, Cincinnati Financial is 1.43 times more volatile than RLI Corp. It trades about 0.29 of its total potential returns per unit of risk. RLI Corp is currently generating about 0.51 per unit of volatility. If you would invest 15,663 in RLI Corp on August 31, 2024 and sell it today you would earn a total of 2,361 from holding RLI Corp or generate 15.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. RLI Corp
Performance |
| Timeline |
| Cincinnati Financial |
| RLI Corp |
Cincinnati Financial and RLI Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and RLI Corp
The main advantage of trading using opposite Cincinnati Financial and RLI Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, RLI Corp 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 RLI Corp will offset losses from the drop in RLI Corp's long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. The Allstate | Cincinnati Financial vs. Selective Insurance Group |
| RLI Corp vs. Horace Mann Educators | RLI Corp vs. Kemper | RLI Corp vs. Global Indemnity PLC | RLI Corp vs. Argo Group International |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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