Correlation Between Cincinnati Financial and BRIT AMER

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

Diversification Opportunities for Cincinnati Financial and BRIT AMER

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Cincinnati and BRIT is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO 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 BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and BRIT AMER go up and down completely randomly.

Pair Corralation between Cincinnati Financial and BRIT AMER

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to under-perform the BRIT AMER. In addition to that, Cincinnati Financial is 1.59 times more volatile than BRIT AMER TOBACCO. It trades about -0.3 of its total potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about 0.07 per unit of volatility. If you would invest  3,539  in BRIT AMER TOBACCO on October 10, 2024 and sell it today you would earn a total of  37.00  from holding BRIT AMER TOBACCO or generate 1.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Cincinnati Financial Corp  vs.  BRIT AMER TOBACCO

 Performance 
       Timeline  
Cincinnati Financial Corp 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
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.
BRIT AMER TOBACCO 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BRIT AMER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cincinnati Financial and BRIT AMER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cincinnati Financial and BRIT AMER

The main advantage of trading using opposite Cincinnati Financial and BRIT AMER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, BRIT AMER 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 BRIT AMER will offset losses from the drop in BRIT AMER's long position.
The idea behind Cincinnati Financial Corp and BRIT AMER TOBACCO 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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