Correlation Between Microsoft and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Cincinnati Financial, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Cincinnati Financial.
Diversification Opportunities for Microsoft and Cincinnati Financial
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and Cincinnati is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Microsoft and Cincinnati Financial
Given the investment horizon of 90 days Microsoft is expected to under-perform the Cincinnati Financial. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.09 times less risky than Cincinnati Financial. The stock trades about -0.05 of its potential returns per unit of risk. The Cincinnati Financial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 14,449 in Cincinnati Financial on August 27, 2024 and sell it today you would earn a total of 1,198 from holding Cincinnati Financial or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Cincinnati Financial
Performance |
| Timeline |
| Microsoft |
| Cincinnati Financial |
Microsoft and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Cincinnati Financial
The main advantage of trading using opposite Microsoft and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |