Correlation Between Cincinnati Financial and White Mountains
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and White Mountains 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 White Mountains into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and White Mountains Insurance, you can compare the effects of market volatilities on Cincinnati Financial and White Mountains 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 White Mountains. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and White Mountains.
Diversification Opportunities for Cincinnati Financial and White Mountains
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cincinnati and White is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and White Mountains Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on White Mountains 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 White Mountains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of White Mountains Insurance has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and White Mountains go up and down completely randomly.
Pair Corralation between Cincinnati Financial and White Mountains
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.31 times more return on investment than White Mountains. However, Cincinnati Financial is 1.31 times more volatile than White Mountains Insurance. It trades about -0.05 of its potential returns per unit of risk. White Mountains Insurance is currently generating about -0.14 per unit of risk. If you would invest 14,290 in Cincinnati Financial on October 23, 2024 and sell it today you would lose (224.00) from holding Cincinnati Financial or give up 1.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. White Mountains Insurance
Performance |
| Timeline |
| Cincinnati Financial |
| White Mountains Insurance |
Cincinnati Financial and White Mountains Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and White Mountains
The main advantage of trading using opposite Cincinnati Financial and White Mountains positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, White Mountains 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 White Mountains will offset losses from the drop in White Mountains' long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
| White Mountains vs. NI Holdings | White Mountains vs. Donegal Group A | White Mountains vs. Donegal Group B | White Mountains vs. The Hanover Insurance |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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