Correlation Between Cincinnati Financial and Morgan Stanley

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

Diversification Opportunities for Cincinnati Financial and Morgan Stanley

-0.22

Correlation Coefficient

Cincinnati Financial  Morgan Stanley

Very good diversification

The 3 months correlation between Cincinnati and Morgan is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Morgan Stanley go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Morgan Stanley

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 0.58 times more return on investment than Morgan Stanley. However, Cincinnati Financial Corp is 1.71 times less risky than Morgan Stanley. It trades about -0.02 of its potential returns per unit of risk. Morgan Stanley is currently generating about -0.14 per unit of risk. If you would invest  13,832  in Cincinnati Financial Corp on December 26, 2024 and sell it today you would lose (382.00) from holding Cincinnati Financial Corp or give up 2.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.66%
Values	Daily Returns

Cincinnati Financial Corp  vs.  Morgan Stanley

Cincinnati Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cincinnati Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cincinnati Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Morgan Stanley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cincinnati Financial and Morgan Stanley

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

The idea behind Cincinnati Financial Corp and Morgan Stanley 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.