Correlation Between Mills Music and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Mills Music 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 Mills Music and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mills Music Trust and Cincinnati Financial, you can compare the effects of market volatilities on Mills Music 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 Mills Music with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mills Music and Cincinnati Financial.
Diversification Opportunities for Mills Music and Cincinnati Financial
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mills and Cincinnati is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Mills Music Trust and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Mills Music 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 Mills Music Trust 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 Mills Music i.e., Mills Music and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Mills Music and Cincinnati Financial
Assuming the 90 days horizon Mills Music Trust is expected to generate 2.91 times more return on investment than Cincinnati Financial. However, Mills Music is 2.91 times more volatile than Cincinnati Financial. It trades about 0.03 of its potential returns per unit of risk. Cincinnati Financial is currently generating about 0.07 per unit of risk. If you would invest 3,568 in Mills Music Trust on September 3, 2024 and sell it today you would earn a total of 279.00 from holding Mills Music Trust or generate 7.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 65.25% |
| Values | Daily Returns |
Mills Music Trust vs. Cincinnati Financial
Performance |
| Timeline |
| Mills Music Trust |
| Cincinnati Financial |
Mills Music and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mills Music and Cincinnati Financial
The main advantage of trading using opposite Mills Music and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mills Music 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.| Mills Music vs. Cintas | Mills Music vs. Thomson Reuters Corp | Mills Music vs. Global Payments | Mills Music vs. RB Global |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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