Correlation Between Cincinnati Financial and Ameriprise Financial

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

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

Diversification Opportunities for Cincinnati Financial and Ameriprise Financial

0.72

Correlation Coefficient

Cincinnati Financial  Ameriprise Financial

Poor diversification

The 3 months correlation between Cincinnati and Ameriprise is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Corp are associated (or correlated) with Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Ameriprise Financial

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to under-perform the Ameriprise Financial. But the stock apears to be less risky and, when comparing its historical volatility, Cincinnati Financial Corp is 1.03 times less risky than Ameriprise Financial. The stock trades about 0.0 of its potential returns per unit of risk. The Ameriprise Financial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  50,077  in Ameriprise Financial on October 25, 2024 and sell it today you would earn a total of  5,721  from holding Ameriprise Financial or generate 11.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.44%
Values	Daily Returns

Cincinnati Financial Corp  vs.  Ameriprise Financial

Cincinnati Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ameriprise Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ameriprise Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cincinnati Financial and Ameriprise Financial

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

The idea behind Cincinnati Financial Corp and Ameriprise 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.