Correlation Between Mattel and Cincinnati Financial

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

Diversification Opportunities for Mattel and Cincinnati Financial

-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between Mattel and Cincinnati is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and Mattel 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 Mattel Inc 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 Mattel i.e., Mattel and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Mattel and Cincinnati Financial

Considering the 90-day investment horizon Mattel Inc is expected to under-perform the Cincinnati Financial. In addition to that, Mattel is 1.2 times more volatile than Cincinnati Financial. It trades about -0.04 of its total potential returns per unit of risk. Cincinnati Financial is currently generating about 0.07 per unit of volatility. If you would invest  13,535  in Cincinnati Financial on September 30, 2024 and sell it today you would earn a total of  870.00  from holding Cincinnati Financial or generate 6.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Mattel Inc  vs.  Cincinnati Financial

 Performance 
       Timeline  
Mattel Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mattel is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
Cincinnati Financial 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mattel and Cincinnati Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mattel and Cincinnati Financial

The main advantage of trading using opposite Mattel and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mattel 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.
The idea behind Mattel Inc and Cincinnati Financial 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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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 CEOs Directory module to screen CEOs from public companies around the world.

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