Correlation Between Cincinnati Financial and Quadrise Plc

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

Diversification Opportunities for Cincinnati Financial and Quadrise Plc

0.25

Correlation Coefficient

Cincinnati Financial  Quadrise Plc

Modest diversification

The 3 months correlation between Cincinnati and Quadrise is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Quadrise Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quadrise 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 Quadrise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quadrise Plc has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Quadrise Plc go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Quadrise Plc

Assuming the 90 days trading horizon Cincinnati Financial is expected to generate 5.59 times less return on investment than Quadrise Plc. But when comparing it to its historical volatility, Cincinnati Financial Corp is 3.3 times less risky than Quadrise Plc. It trades about 0.05 of its potential returns per unit of risk. Quadrise Plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  156.00  in Quadrise Plc on October 8, 2024 and sell it today you would earn a total of  562.00  from holding Quadrise Plc or generate 360.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.18%
Values	Daily Returns

Cincinnati Financial Corp  vs.  Quadrise Plc

Cincinnati Financial Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial Corp are ranked lower than 5 (%) 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.

Quadrise Plc

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quadrise Plc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Quadrise Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cincinnati Financial and Quadrise Plc

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

The idea behind Cincinnati Financial Corp and Quadrise 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.