Correlation Between Cincinnati Financial and Tesla
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Tesla 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 Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and Tesla Inc, you can compare the effects of market volatilities on Cincinnati Financial and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Tesla.
Diversification Opportunities for Cincinnati Financial and Tesla
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cincinnati and Tesla is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Tesla go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Tesla
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 2.64 times less return on investment than Tesla. But when comparing it to its historical volatility, Cincinnati Financial is 2.82 times less risky than Tesla. It trades about 0.28 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 25,755 in Tesla Inc on August 31, 2024 and sell it today you would earn a total of 7,534 from holding Tesla Inc or generate 29.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cincinnati Financial vs. Tesla Inc
Performance |
| Timeline |
| Cincinnati Financial |
| Tesla Inc |
Cincinnati Financial and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Tesla
The main advantage of trading using opposite Cincinnati Financial and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. The Allstate | Cincinnati Financial vs. CNA Financial |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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