Correlation Between Argo Group and Cincinnati Financial

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

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

Diversification Opportunities for Argo Group and Cincinnati Financial

-0.37

Correlation Coefficient

Argo Group  Cincinnati Financial

Very good diversification

The 3 months correlation between Argo and Cincinnati is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Argo Group Limited 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 Argo Group 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 Argo Group Limited 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 Argo Group i.e., Argo Group and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Argo Group and Cincinnati Financial

Assuming the 90 days trading horizon Argo Group Limited is expected to under-perform the Cincinnati Financial. In addition to that, Argo Group is 2.48 times more volatile than Cincinnati Financial Corp. It trades about -0.14 of its total potential returns per unit of risk. Cincinnati Financial Corp is currently generating about 0.18 per unit of volatility. If you would invest  13,556  in Cincinnati Financial Corp on August 30, 2024 and sell it today you would earn a total of  2,527  from holding Cincinnati Financial Corp or generate 18.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Argo Group Limited  vs.  Cincinnati Financial Corp

Argo Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Argo Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cincinnati Financial Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Cincinnati Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Argo Group and Cincinnati Financial

The main advantage of trading using opposite Argo Group and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argo Group 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 Argo Group Limited 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.