Correlation Between Cincinnati Financial and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Selective Insurance 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 Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and Selective Insurance Group, you can compare the effects of market volatilities on Cincinnati Financial and Selective Insurance 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 Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Selective Insurance.
Diversification Opportunities for Cincinnati Financial and Selective Insurance
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cincinnati and Selective is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Selective Insurance go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Selective Insurance
Given the investment horizon of 90 days Cincinnati Financial is expected to under-perform the Selective Insurance. In addition to that, Cincinnati Financial is 1.27 times more volatile than Selective Insurance Group. It trades about -0.37 of its total potential returns per unit of risk. Selective Insurance Group is currently generating about -0.33 per unit of volatility. If you would invest 9,673 in Selective Insurance Group on October 14, 2024 and sell it today you would lose (703.00) from holding Selective Insurance Group or give up 7.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. Selective Insurance Group
Performance |
| Timeline |
| Cincinnati Financial |
| Selective Insurance |
Cincinnati Financial and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Selective Insurance
The main advantage of trading using opposite Cincinnati Financial and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Selective Insurance 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
| Selective Insurance vs. Kemper | Selective Insurance vs. Donegal Group B | Selective Insurance vs. Argo Group International | Selective Insurance vs. Global Indemnity PLC |
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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