Correlation Between NI Holdings and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both NI Holdings 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 NI Holdings and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NI Holdings and Cincinnati Financial, you can compare the effects of market volatilities on NI Holdings 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 NI Holdings with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NI Holdings and Cincinnati Financial.
Diversification Opportunities for NI Holdings and Cincinnati Financial
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NODK and Cincinnati is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and NI Holdings 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 NI Holdings 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 NI Holdings i.e., NI Holdings and Cincinnati Financial go up and down completely randomly.
Pair Corralation between NI Holdings and Cincinnati Financial
Given the investment horizon of 90 days NI Holdings is expected to generate 0.95 times more return on investment than Cincinnati Financial. However, NI Holdings is 1.05 times less risky than Cincinnati Financial. It trades about -0.09 of its potential returns per unit of risk. Cincinnati Financial is currently generating about -0.11 per unit of risk. If you would invest 1,556 in NI Holdings on November 3, 2024 and sell it today you would lose (46.00) from holding NI Holdings or give up 2.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NI Holdings vs. Cincinnati Financial
Performance |
| Timeline |
| NI Holdings |
| Cincinnati Financial |
NI Holdings and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NI Holdings and Cincinnati Financial
The main advantage of trading using opposite NI Holdings and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings 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.| NI Holdings vs. Horace Mann Educators | NI Holdings vs. Donegal Group A | NI Holdings vs. Global Indemnity PLC | NI Holdings vs. Selective Insurance Group |
| 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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