Correlation Between Palomar Holdings and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Palomar 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 Palomar 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 Palomar Holdings and Cincinnati Financial, you can compare the effects of market volatilities on Palomar 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 Palomar Holdings with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palomar Holdings and Cincinnati Financial.
Diversification Opportunities for Palomar Holdings and Cincinnati Financial
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Palomar and Cincinnati is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Palomar 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 Palomar 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 Palomar Holdings i.e., Palomar Holdings and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Palomar Holdings and Cincinnati Financial
Given the investment horizon of 90 days Palomar Holdings is expected to generate 1.33 times more return on investment than Cincinnati Financial. However, Palomar Holdings is 1.33 times more volatile 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 10,438 in Palomar Holdings on November 3, 2024 and sell it today you would earn a total of 349.00 from holding Palomar Holdings or generate 3.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Palomar Holdings vs. Cincinnati Financial
Performance |
| Timeline |
| Palomar Holdings |
| Cincinnati Financial |
Palomar Holdings and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palomar Holdings and Cincinnati Financial
The main advantage of trading using opposite Palomar Holdings and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar 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.| Palomar Holdings vs. Horace Mann Educators | Palomar Holdings vs. Kemper | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. Global Indemnity PLC |
| 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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