Correlation Between Cincinnati Financial and Insperity

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

Diversification Opportunities for Cincinnati Financial and Insperity

-0.33

Correlation Coefficient

Cincinnati Financial  Insperity

Very good diversification

The 3 months correlation between Cincinnati and Insperity is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Insperity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insperity 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 Insperity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insperity has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Insperity go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Insperity

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 0.54 times more return on investment than Insperity. However, Cincinnati Financial Corp is 1.84 times less risky than Insperity. It trades about 0.12 of its potential returns per unit of risk. Insperity is currently generating about -0.01 per unit of risk. If you would invest  12,214  in Cincinnati Financial Corp on October 10, 2024 and sell it today you would earn a total of  1,391  from holding Cincinnati Financial Corp or generate 11.39% return on investment over 90 days.

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

Cincinnati Financial Corp  vs.  Insperity

Cincinnati Financial Corp

Risk-Adjusted Performance

9 of 100

OK

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

Insperity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insperity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Insperity is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cincinnati Financial and Insperity

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

The idea behind Cincinnati Financial Corp and Insperity 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.