Correlation Between 6325C0EA5 and Cincinnati Financial

Can any of the company-specific risk be diversified away by investing in both 6325C0EA5 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 6325C0EA5 and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NAB 4891583 12 JAN 25 and Cincinnati Financial, you can compare the effects of market volatilities on 6325C0EA5 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 6325C0EA5 with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of 6325C0EA5 and Cincinnati Financial.

Diversification Opportunities for 6325C0EA5 and Cincinnati Financial

-0.07

Correlation Coefficient

6325C0EA5  Cincinnati Financial

Good diversification

The 3 months correlation between 6325C0EA5 and Cincinnati is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding NAB 4891583 12 JAN 25 and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial and 6325C0EA5 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 NAB 4891583 12 JAN 25 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 6325C0EA5 i.e., 6325C0EA5 and Cincinnati Financial go up and down completely randomly.

Pair Corralation between 6325C0EA5 and Cincinnati Financial

Assuming the 90 days trading horizon NAB 4891583 12 JAN 25 is expected to under-perform the Cincinnati Financial. But the bond apears to be less risky and, when comparing its historical volatility, NAB 4891583 12 JAN 25 is 5.05 times less risky than Cincinnati Financial. The bond trades about -0.23 of its potential returns per unit of risk. The Cincinnati Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  13,546  in Cincinnati Financial on September 21, 2024 and sell it today you would earn a total of  903.00  from holding Cincinnati Financial or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	31.25%
Values	Daily Returns

NAB 4891583 12 JAN 25  vs.  Cincinnati Financial

NAB 4891583 12

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAB 4891583 12 JAN 25 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, 6325C0EA5 is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Cincinnati Financial

Risk-Adjusted Performance

5 of 100

Insignificant

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 conflicting basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with 6325C0EA5 and Cincinnati Financial

The main advantage of trading using opposite 6325C0EA5 and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 6325C0EA5 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 NAB 4891583 12 JAN 25 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.