Correlation Between Cincinnati Financial and FAST RETAIL

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

Diversification Opportunities for Cincinnati Financial and FAST RETAIL

0.17

Correlation Coefficient

Cincinnati Financial  FAST RETAIL

Average diversification

The 3 months correlation between Cincinnati and FAST is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and FAST RETAIL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST RETAIL ADR 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 FAST RETAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST RETAIL ADR has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and FAST RETAIL go up and down completely randomly.

Pair Corralation between Cincinnati Financial and FAST RETAIL

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 0.93 times more return on investment than FAST RETAIL. However, Cincinnati Financial Corp is 1.08 times less risky than FAST RETAIL. It trades about 0.04 of its potential returns per unit of risk. FAST RETAIL ADR is currently generating about 0.02 per unit of risk. If you would invest  12,939  in Cincinnati Financial Corp on October 25, 2024 and sell it today you would earn a total of  366.00  from holding Cincinnati Financial Corp or generate 2.83% return on investment over 90 days.

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

Cincinnati Financial Corp  vs.  FAST RETAIL ADR

Cincinnati Financial Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cincinnati Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

FAST RETAIL ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FAST RETAIL 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 FAST RETAIL

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

The idea behind Cincinnati Financial Corp and FAST RETAIL ADR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.