Correlation Between Travelers Companies and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Travelers Companies 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 Travelers Companies and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Travelers Companies and Cincinnati Financial, you can compare the effects of market volatilities on Travelers Companies 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 Travelers Companies with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Cincinnati Financial.
Diversification Opportunities for Travelers Companies and Cincinnati Financial
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Travelers and Cincinnati is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Travelers Companies 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 The Travelers Companies 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 Travelers Companies i.e., Travelers Companies and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Travelers Companies and Cincinnati Financial
Considering the 90-day investment horizon Travelers Companies is expected to generate 1.19 times less return on investment than Cincinnati Financial. In addition to that, Travelers Companies is 1.02 times more volatile than Cincinnati Financial. It trades about 0.1 of its total potential returns per unit of risk. Cincinnati Financial is currently generating about 0.12 per unit of volatility. If you would invest 9,374 in Cincinnati Financial on August 28, 2024 and sell it today you would earn a total of 6,568 from holding Cincinnati Financial or generate 70.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Travelers Companies vs. Cincinnati Financial
Performance |
| Timeline |
| The Travelers Companies |
| Cincinnati Financial |
Travelers Companies and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travelers Companies and Cincinnati Financial
The main advantage of trading using opposite Travelers Companies and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies 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.| Travelers Companies vs. Fiverr International | Travelers Companies vs. Pinterest | Travelers Companies vs. Upstart Holdings | Travelers Companies vs. Fastly Inc |
| 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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