Correlation Between HP and CINCINNATI

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Can any of the company-specific risk be diversified away by investing in both HP and CINCINNATI 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 HP and CINCINNATI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and CINCINNATI FINL P, you can compare the effects of market volatilities on HP and CINCINNATI 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 HP with a short position of CINCINNATI. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and CINCINNATI.

Diversification Opportunities for HP and CINCINNATI

-0.35
  Correlation Coefficient
 HP

Very good diversification

The 3 months correlation between HP and CINCINNATI is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and CINCINNATI FINL P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CINCINNATI FINL P and HP 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 HP Inc are associated (or correlated) with CINCINNATI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CINCINNATI FINL P has no effect on the direction of HP i.e., HP and CINCINNATI go up and down completely randomly.

Pair Corralation between HP and CINCINNATI

Considering the 90-day investment horizon HP Inc is expected to generate 2.95 times more return on investment than CINCINNATI. However, HP is 2.95 times more volatile than CINCINNATI FINL P. It trades about 0.04 of its potential returns per unit of risk. CINCINNATI FINL P is currently generating about -0.01 per unit of risk. If you would invest  2,853  in HP Inc on August 31, 2024 and sell it today you would earn a total of  690.00  from holding HP Inc or generate 24.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy89.3%
ValuesDaily Returns

HP Inc  vs.  CINCINNATI FINL P

 Performance 
       Timeline  
HP Inc 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.
CINCINNATI FINL P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CINCINNATI FINL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CINCINNATI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HP and CINCINNATI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and CINCINNATI

The main advantage of trading using opposite HP and CINCINNATI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, CINCINNATI 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 will offset losses from the drop in CINCINNATI's long position.
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The idea behind HP Inc and CINCINNATI FINL P pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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