Correlation Between GoldMining and Cincinnati Financial

Can any of the company-specific risk be diversified away by investing in both GoldMining and Cincinnati Financial 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 GoldMining and Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GoldMining and Cincinnati Financial Corp, you can compare the effects of market volatilities on GoldMining and Cincinnati Financial 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 GoldMining with a short position of Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and Cincinnati Financial.

Diversification Opportunities for GoldMining and Cincinnati Financial

0.38

Correlation Coefficient

GoldMining  Cincinnati Financial

Weak diversification

The 3 months correlation between GoldMining and Cincinnati is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Cincinnati Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial Corp and GoldMining 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 GoldMining are associated (or correlated) with Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial Corp has no effect on the direction of GoldMining i.e., GoldMining and Cincinnati Financial go up and down completely randomly.

Pair Corralation between GoldMining and Cincinnati Financial

Assuming the 90 days trading horizon GoldMining is expected to generate 1.4 times more return on investment than Cincinnati Financial. However, GoldMining is 1.4 times more volatile than Cincinnati Financial Corp. It trades about 0.09 of its potential returns per unit of risk. Cincinnati Financial Corp is currently generating about 0.03 per unit of risk. If you would invest  111.00  in GoldMining on December 27, 2024 and sell it today you would earn a total of  9.00  from holding GoldMining or generate 8.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	66.67%
Values	Daily Returns

GoldMining  vs.  Cincinnati Financial Corp

GoldMining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GoldMining are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GoldMining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cincinnati Financial Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with GoldMining and Cincinnati Financial

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

The idea behind GoldMining and Cincinnati Financial Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.