Correlation Between Cincinnati Financial and URU Metals

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

Diversification Opportunities for Cincinnati Financial and URU Metals

-0.05

Correlation Coefficient

Cincinnati Financial  URU Metals

Good diversification

The 3 months correlation between Cincinnati and URU is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and URU Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URU Metals 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 URU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URU Metals has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and URU Metals go up and down completely randomly.

Pair Corralation between Cincinnati Financial and URU Metals

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 0.59 times more return on investment than URU Metals. However, Cincinnati Financial Corp is 1.7 times less risky than URU Metals. It trades about -0.08 of its potential returns per unit of risk. URU Metals is currently generating about -0.09 per unit of risk. If you would invest  15,238  in Cincinnati Financial Corp on December 8, 2024 and sell it today you would lose (1,395) from holding Cincinnati Financial Corp or give up 9.15% of portfolio value over 90 days.

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

Cincinnati Financial Corp  vs.  URU Metals

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

URU Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days URU Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cincinnati Financial and URU Metals

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

The idea behind Cincinnati Financial Corp and URU Metals 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.