Correlation Between Cincinnati Financial and JB Hunt

Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and JB Hunt 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 JB Hunt 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 JB Hunt Transport, you can compare the effects of market volatilities on Cincinnati Financial and JB Hunt 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 JB Hunt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and JB Hunt.

Diversification Opportunities for Cincinnati Financial and JB Hunt

0.68

Correlation Coefficient

Cincinnati Financial  JB Hunt

Poor diversification

The 3 months correlation between Cincinnati and 0J71 is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and JB Hunt Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Hunt Transport 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 JB Hunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Hunt Transport has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and JB Hunt go up and down completely randomly.

Pair Corralation between Cincinnati Financial and JB Hunt

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 0.83 times more return on investment than JB Hunt. However, Cincinnati Financial Corp is 1.21 times less risky than JB Hunt. It trades about 0.1 of its potential returns per unit of risk. JB Hunt Transport is currently generating about -0.01 per unit of risk. If you would invest  10,067  in Cincinnati Financial Corp on October 5, 2024 and sell it today you would earn a total of  4,250  from holding Cincinnati Financial Corp or generate 42.22% return on investment over 90 days.

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

Cincinnati Financial Corp  vs.  JB Hunt Transport

Cincinnati Financial Corp

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

JB Hunt Transport

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JB Hunt Transport are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, JB Hunt is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cincinnati Financial and JB Hunt

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

The idea behind Cincinnati Financial Corp and JB Hunt Transport 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.