Correlation Between RLI Corp and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both RLI Corp 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 RLI Corp and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RLI Corp and Cincinnati Financial, you can compare the effects of market volatilities on RLI Corp 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 RLI Corp with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLI Corp and Cincinnati Financial.
Diversification Opportunities for RLI Corp and Cincinnati Financial
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between RLI and Cincinnati is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and RLI Corp 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 RLI Corp 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 RLI Corp i.e., RLI Corp and Cincinnati Financial go up and down completely randomly.
Pair Corralation between RLI Corp and Cincinnati Financial
Considering the 90-day investment horizon RLI Corp is expected to under-perform the Cincinnati Financial. But the stock apears to be less risky and, when comparing its historical volatility, RLI Corp is 1.14 times less risky than Cincinnati Financial. The stock trades about -0.26 of its potential returns per unit of risk. The Cincinnati Financial is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 14,290 in Cincinnati Financial on October 23, 2024 and sell it today you would lose (224.00) from holding Cincinnati Financial or give up 1.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLI Corp vs. Cincinnati Financial
Performance |
| Timeline |
| RLI Corp |
| Cincinnati Financial |
RLI Corp and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLI Corp and Cincinnati Financial
The main advantage of trading using opposite RLI Corp and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLI Corp 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.| RLI Corp vs. Horace Mann Educators | RLI Corp vs. Kemper | RLI Corp vs. Global Indemnity PLC | RLI Corp vs. Argo Group International |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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