Correlation Between Cincinnati Financial and Markel

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

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

Diversification Opportunities for Cincinnati Financial and Markel

0.96

Correlation Coefficient

Cincinnati Financial  Markel

Almost no diversification

The 3 months correlation between Cincinnati and Markel is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Markel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markel 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 Markel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markel has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Markel go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Markel

Assuming the 90 days horizon Cincinnati Financial is expected to under-perform the Markel. In addition to that, Cincinnati Financial is 1.24 times more volatile than Markel. It trades about -0.48 of its total potential returns per unit of risk. Markel is currently generating about -0.14 per unit of volatility. If you would invest  167,300  in Markel on September 24, 2024 and sell it today you would lose (4,200) from holding Markel or give up 2.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Cincinnati Financial  vs.  Markel

Cincinnati Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Markel

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Markel are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Markel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cincinnati Financial and Markel

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

The idea behind Cincinnati Financial and Markel 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.