Correlation Between Cincinnati Financial and Travelers Companies
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Travelers Companies 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 Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and The Travelers Companies, you can compare the effects of market volatilities on Cincinnati Financial and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Travelers Companies.
Diversification Opportunities for Cincinnati Financial and Travelers Companies
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cincinnati and Travelers is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Travelers Companies go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Travelers Companies
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.09 times more return on investment than Travelers Companies. However, Cincinnati Financial is 1.09 times more volatile than The Travelers Companies. It trades about 0.06 of its potential returns per unit of risk. The Travelers Companies is currently generating about 0.06 per unit of risk. If you would invest 10,208 in Cincinnati Financial on August 26, 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 Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. The Travelers Companies
Performance |
| Timeline |
| Cincinnati Financial |
| The Travelers Companies |
Cincinnati Financial and Travelers Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Travelers Companies
The main advantage of trading using opposite Cincinnati Financial and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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