Correlation Between Cincinnati Financial and Flowers Foods

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

Diversification Opportunities for Cincinnati Financial and Flowers Foods

0.42

Correlation Coefficient

Cincinnati Financial  Flowers Foods

Very weak diversification

The 3 months correlation between Cincinnati and Flowers is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Flowers Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowers Foods 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 Flowers Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowers Foods has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Flowers Foods go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Flowers Foods

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 1.3 times more return on investment than Flowers Foods. However, Cincinnati Financial is 1.3 times more volatile than Flowers Foods. It trades about 0.13 of its potential returns per unit of risk. Flowers Foods is currently generating about 0.02 per unit of risk. If you would invest  12,159  in Cincinnati Financial Corp on October 8, 2024 and sell it today you would earn a total of  1,586  from holding Cincinnati Financial Corp or generate 13.04% return on investment over 90 days.

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

Cincinnati Financial Corp  vs.  Flowers Foods

Cincinnati Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Cincinnati Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Flowers Foods

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Cincinnati Financial Corp and Flowers Foods 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.