Correlation Between Cincinnati Financial and Universal Music
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Universal Music 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 Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and Universal Music Group, you can compare the effects of market volatilities on Cincinnati Financial and Universal Music 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 Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Universal Music.
Diversification Opportunities for Cincinnati Financial and Universal Music
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cincinnati and Universal is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Universal Music go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Universal Music
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 0.88 times more return on investment than Universal Music. However, Cincinnati Financial is 1.14 times less risky than Universal Music. It trades about 0.35 of its potential returns per unit of risk. Universal Music Group is currently generating about -0.13 per unit of risk. If you would invest 14,065 in Cincinnati Financial on September 2, 2024 and sell it today you would earn a total of 1,918 from holding Cincinnati Financial or generate 13.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. Universal Music Group
Performance |
| Timeline |
| Cincinnati Financial |
| Universal Music Group |
Cincinnati Financial and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Universal Music
The main advantage of trading using opposite Cincinnati Financial and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Universal Music 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 Universal Music will offset losses from the drop in Universal Music's long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
| Universal Music vs. Thunderbird Entertainment Group | Universal Music vs. Warner Music Group | Universal Music vs. Live Nation Entertainment | Universal Music vs. Atlanta Braves Holdings, |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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