Correlation Between Cincinnati Financial and Kurita Water

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

Diversification Opportunities for Cincinnati Financial and Kurita Water

0.49

Correlation Coefficient

Cincinnati Financial  Kurita Water

Very weak diversification

The 3 months correlation between Cincinnati and Kurita is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Kurita Water Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kurita Water Industries 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 Kurita Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kurita Water Industries has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Kurita Water go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Kurita Water

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 0.64 times more return on investment than Kurita Water. However, Cincinnati Financial Corp is 1.56 times less risky than Kurita Water. It trades about -0.03 of its potential returns per unit of risk. Kurita Water Industries is currently generating about -0.05 per unit of risk. If you would invest  13,875  in Cincinnati Financial Corp on December 23, 2024 and sell it today you would lose (435.00) from holding Cincinnati Financial Corp or give up 3.14% of portfolio value over 90 days.

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

Cincinnati Financial Corp  vs.  Kurita Water Industries

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Kurita Water Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kurita Water Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cincinnati Financial and Kurita Water

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

The idea behind Cincinnati Financial Corp and Kurita Water Industries 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.