Correlation Between Willamette Valley and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Willamette Valley 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 Willamette Valley and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Willamette Valley Vineyards and Cincinnati Financial, you can compare the effects of market volatilities on Willamette Valley 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 Willamette Valley with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Cincinnati Financial.
Diversification Opportunities for Willamette Valley and Cincinnati Financial
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Willamette and Cincinnati is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Willamette Valley and Cincinnati Financial
Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Cincinnati Financial. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 1.29 times less risky than Cincinnati Financial. The stock trades about -0.03 of its potential returns per unit of risk. The Cincinnati Financial is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 14,449 in Cincinnati Financial on August 27, 2024 and sell it today you would earn a total of 1,493 from holding Cincinnati Financial or generate 10.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Willamette Valley Vineyards vs. Cincinnati Financial
Performance |
| Timeline |
| Willamette Valley |
| Cincinnati Financial |
Willamette Valley and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Willamette Valley and Cincinnati Financial
The main advantage of trading using opposite Willamette Valley and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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.| Willamette Valley vs. Naked Wines plc | Willamette Valley vs. Andrew Peller Limited | Willamette Valley vs. Iconic Brands | Willamette Valley vs. Naked Wines 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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