Correlation Between Cincinnati Financial and Dentsu

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

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

Diversification Opportunities for Cincinnati Financial and Dentsu

-0.67

Correlation Coefficient

Cincinnati Financial  Dentsu

Excellent diversification

The 3 months correlation between Cincinnati and Dentsu is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Dentsu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsu Group 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 are associated (or correlated) with Dentsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dentsu Group has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Dentsu go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Dentsu

Assuming the 90 days horizon Cincinnati Financial is expected to generate 0.52 times more return on investment than Dentsu. However, Cincinnati Financial is 1.92 times less risky than Dentsu. It trades about 0.15 of its potential returns per unit of risk. Dentsu Group is currently generating about 0.0 per unit of risk. If you would invest  10,260  in Cincinnati Financial on October 13, 2024 and sell it today you would earn a total of  3,425  from holding Cincinnati Financial or generate 33.38% return on investment over 90 days.

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

Cincinnati Financial  vs.  Dentsu Group

Cincinnati Financial

Risk-Adjusted Performance

8 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dentsu Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dentsu Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cincinnati Financial and Dentsu

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

The idea behind Cincinnati Financial and Dentsu Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.