Correlation Between Cincinnati Financial and DEUTSCHE

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

By analyzing existing cross correlation between Cincinnati Financial and DEUTSCHE BANK AG, you can compare the effects of market volatilities on Cincinnati Financial and DEUTSCHE 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 DEUTSCHE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and DEUTSCHE.

Diversification Opportunities for Cincinnati Financial and DEUTSCHE

-0.1

Correlation Coefficient

Cincinnati Financial  DEUTSCHE

Good diversification

The 3 months correlation between Cincinnati and DEUTSCHE is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and DEUTSCHE BANK AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEUTSCHE BANK AG 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 DEUTSCHE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEUTSCHE BANK AG has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and DEUTSCHE go up and down completely randomly.

Pair Corralation between Cincinnati Financial and DEUTSCHE

Given the investment horizon of 90 days Cincinnati Financial is expected to under-perform the DEUTSCHE. But the stock apears to be less risky and, when comparing its historical volatility, Cincinnati Financial is 1.26 times less risky than DEUTSCHE. The stock trades about -0.39 of its potential returns per unit of risk. The DEUTSCHE BANK AG is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  9,617  in DEUTSCHE BANK AG on September 24, 2024 and sell it today you would lose (665.00) from holding DEUTSCHE BANK AG or give up 6.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Cincinnati Financial  vs.  DEUTSCHE BANK AG

Cincinnati Financial

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Cincinnati Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

DEUTSCHE BANK AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DEUTSCHE BANK AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for DEUTSCHE BANK AG investors.

Pair Trading with Cincinnati Financial and DEUTSCHE

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

The idea behind Cincinnati Financial and DEUTSCHE BANK AG 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.