Correlation Between Cincinnati Financial and Progressive

Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Progressive 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 Cincinnati Financial and Progressive into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cincinnati Financial and The Progressive, you can compare the effects of market volatilities on Cincinnati Financial and Progressive 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 Cincinnati Financial with a short position of Progressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Progressive.

Diversification Opportunities for Cincinnati Financial and Progressive

0.8

Correlation Coefficient

Cincinnati Financial  Progressive

Very poor diversification

The 3 months correlation between Cincinnati and Progressive is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and The Progressive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive and Cincinnati Financial 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 Cincinnati Financial are associated (or correlated) with Progressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Progressive has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Progressive go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Progressive

Assuming the 90 days horizon Cincinnati Financial is expected to generate 0.99 times more return on investment than Progressive. However, Cincinnati Financial is 1.01 times less risky than Progressive. It trades about 0.09 of its potential returns per unit of risk. The Progressive is currently generating about 0.01 per unit of risk. If you would invest  12,796  in Cincinnati Financial on September 23, 2024 and sell it today you would earn a total of  844.00  from holding Cincinnati Financial or generate 6.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Cincinnati Financial  vs.  The Progressive

Cincinnati Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cincinnati Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Progressive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Progressive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Progressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cincinnati Financial and Progressive

The main advantage of trading using opposite Cincinnati Financial and Progressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Progressive 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 Progressive will offset losses from the drop in Progressive's long position.

The idea behind Cincinnati Financial and The Progressive 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.

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.