Correlation Between Visa and CINCINNATI

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Can any of the company-specific risk be diversified away by investing in both Visa and CINCINNATI 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 Visa and CINCINNATI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and CINCINNATI FINL P, you can compare the effects of market volatilities on Visa and CINCINNATI 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 Visa with a short position of CINCINNATI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and CINCINNATI.

Diversification Opportunities for Visa and CINCINNATI

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Visa and CINCINNATI is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CINCINNATI FINL P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CINCINNATI FINL P and Visa 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 Visa Class A are associated (or correlated) with CINCINNATI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CINCINNATI FINL P has no effect on the direction of Visa i.e., Visa and CINCINNATI go up and down completely randomly.

Pair Corralation between Visa and CINCINNATI

Taking into account the 90-day investment horizon Visa Class A is expected to generate 2.51 times more return on investment than CINCINNATI. However, Visa is 2.51 times more volatile than CINCINNATI FINL P. It trades about 0.34 of its potential returns per unit of risk. CINCINNATI FINL P is currently generating about -0.22 per unit of risk. If you would invest  29,018  in Visa Class A on September 2, 2024 and sell it today you would earn a total of  2,490  from holding Visa Class A or generate 8.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy80.95%
ValuesDaily Returns

Visa Class A  vs.  CINCINNATI FINL P

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.
CINCINNATI FINL P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CINCINNATI FINL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CINCINNATI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Visa and CINCINNATI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and CINCINNATI

The main advantage of trading using opposite Visa and CINCINNATI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, CINCINNATI 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 will offset losses from the drop in CINCINNATI's long position.
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The idea behind Visa Class A and CINCINNATI FINL P pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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