Correlation Between Cincinnati Financial and AstraZeneca PLC

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

Diversification Opportunities for Cincinnati Financial and AstraZeneca PLC

-0.49

Correlation Coefficient

Cincinnati Financial  AstraZeneca PLC

Very good diversification

The 3 months correlation between Cincinnati and AstraZeneca is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Cincinnati Financial and AstraZeneca PLC

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 1.01 times more return on investment than AstraZeneca PLC. However, Cincinnati Financial is 1.01 times more volatile than AstraZeneca PLC. It trades about -0.03 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about -0.04 per unit of risk. If you would invest  14,344  in Cincinnati Financial Corp on October 26, 2024 and sell it today you would lose (644.00) from holding Cincinnati Financial Corp or give up 4.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cincinnati Financial Corp  vs.  AstraZeneca PLC

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

AstraZeneca PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstraZeneca PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AstraZeneca PLC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cincinnati Financial and AstraZeneca PLC

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

The idea behind Cincinnati Financial Corp and AstraZeneca PLC 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.