Correlation Between JPMorgan Japanese and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both JPMorgan Japanese 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 JPMorgan Japanese and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JPMorgan Japanese Investment and Cincinnati Financial Corp, you can compare the effects of market volatilities on JPMorgan Japanese 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 JPMorgan Japanese with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Japanese and Cincinnati Financial.
Diversification Opportunities for JPMorgan Japanese and Cincinnati Financial
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between JPMorgan and Cincinnati is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Japanese Investment and Cincinnati Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial Corp and JPMorgan Japanese 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 JPMorgan Japanese Investment 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 Corp has no effect on the direction of JPMorgan Japanese i.e., JPMorgan Japanese and Cincinnati Financial go up and down completely randomly.
Pair Corralation between JPMorgan Japanese and Cincinnati Financial
Assuming the 90 days trading horizon JPMorgan Japanese Investment is expected to generate 0.42 times more return on investment than Cincinnati Financial. However, JPMorgan Japanese Investment is 2.39 times less risky than Cincinnati Financial. It trades about 0.34 of its potential returns per unit of risk. Cincinnati Financial Corp is currently generating about -0.13 per unit of risk. If you would invest 55,500 in JPMorgan Japanese Investment on October 25, 2024 and sell it today you would earn a total of 2,600 from holding JPMorgan Japanese Investment or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JPMorgan Japanese Investment vs. Cincinnati Financial Corp
Performance |
| Timeline |
| JPMorgan Japanese |
| Cincinnati Financial Corp |
JPMorgan Japanese and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPMorgan Japanese and Cincinnati Financial
The main advantage of trading using opposite JPMorgan Japanese and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Japanese 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.| JPMorgan Japanese vs. BW Offshore | JPMorgan Japanese vs. Gear4music Plc | JPMorgan Japanese vs. Ion Beam Applications | JPMorgan Japanese vs. Orient Telecoms |
| Cincinnati Financial vs. Erste Group Bank | Cincinnati Financial vs. Check Point Software | Cincinnati Financial vs. Software Circle plc | Cincinnati Financial vs. Vitec Software Group |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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