Correlation Between Guangdong Investment and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Cincinnati Financial 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 Guangdong Investment and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and Cincinnati Financial, you can compare the effects of market volatilities on Guangdong Investment and Cincinnati Financial 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 Guangdong Investment with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Cincinnati Financial.
Diversification Opportunities for Guangdong Investment and Cincinnati Financial
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Guangdong and Cincinnati is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Guangdong Investment 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 Guangdong Investment Limited are associated (or correlated) with Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Guangdong Investment and Cincinnati Financial
Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 4.06 times more return on investment than Cincinnati Financial. However, Guangdong Investment is 4.06 times more volatile than Cincinnati Financial. It trades about 0.15 of its potential returns per unit of risk. Cincinnati Financial is currently generating about -0.27 per unit of risk. If you would invest 61.00 in Guangdong Investment Limited on October 28, 2024 and sell it today you would earn a total of 19.00 from holding Guangdong Investment Limited or generate 31.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Cincinnati Financial
Performance |
| Timeline |
| Guangdong Investment |
| Cincinnati Financial |
Guangdong Investment and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Cincinnati Financial
The main advantage of trading using opposite Guangdong Investment and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Cincinnati Financial 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises Water |
| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. The Travelers Companies | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. W R Berkley |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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