Correlation Between Cincinnati Financial and LBG Media

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

Diversification Opportunities for Cincinnati Financial and LBG Media

0.01

Correlation Coefficient

Cincinnati Financial  LBG Media

Significant diversification

The 3 months correlation between Cincinnati and LBG is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and LBG Media PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBG Media 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 LBG Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBG Media PLC has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and LBG Media go up and down completely randomly.

Pair Corralation between Cincinnati Financial and LBG Media

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 0.61 times more return on investment than LBG Media. However, Cincinnati Financial Corp is 1.63 times less risky than LBG Media. It trades about 0.01 of its potential returns per unit of risk. LBG Media PLC is currently generating about -0.07 per unit of risk. If you would invest  14,456  in Cincinnati Financial Corp on December 24, 2024 and sell it today you would earn a total of  43.00  from holding Cincinnati Financial Corp or generate 0.3% return on investment over 90 days.

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

Cincinnati Financial Corp  vs.  LBG Media PLC

Cincinnati Financial Corp

Risk-Adjusted Performance

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.

LBG Media PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days LBG Media PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cincinnati Financial and LBG Media

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

The idea behind Cincinnati Financial Corp and LBG Media 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.