Correlation Between White Mountains and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both White Mountains 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 White Mountains and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between White Mountains Insurance and Cincinnati Financial, you can compare the effects of market volatilities on White Mountains 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 White Mountains with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of White Mountains and Cincinnati Financial.
Diversification Opportunities for White Mountains and Cincinnati Financial
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between White and Cincinnati is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding White Mountains Insurance and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and White Mountains 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 White Mountains Insurance 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 White Mountains i.e., White Mountains and Cincinnati Financial go up and down completely randomly.
Pair Corralation between White Mountains and Cincinnati Financial
Considering the 90-day investment horizon White Mountains is expected to generate 1.11 times less return on investment than Cincinnati Financial. But when comparing it to its historical volatility, White Mountains Insurance is 1.12 times less risky than Cincinnati Financial. It trades about 0.29 of its potential returns per unit of risk. Cincinnati Financial is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 14,344 in Cincinnati Financial on August 31, 2024 and sell it today you would earn a total of 1,672 from holding Cincinnati Financial or generate 11.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
White Mountains Insurance vs. Cincinnati Financial
Performance |
| Timeline |
| White Mountains Insurance |
| Cincinnati Financial |
White Mountains and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with White Mountains and Cincinnati Financial
The main advantage of trading using opposite White Mountains and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if White Mountains 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.| White Mountains vs. NI Holdings | White Mountains vs. Donegal Group A | White Mountains vs. Donegal Group B | White Mountains vs. The Hanover Insurance |
| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. The Allstate | Cincinnati Financial vs. Selective Insurance Group |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |