Correlation Between Cincinnati Financial and Mitsubishi Gas

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

Diversification Opportunities for Cincinnati Financial and Mitsubishi Gas

0.79

Correlation Coefficient

Cincinnati Financial  Mitsubishi Gas

Poor diversification

The 3 months correlation between Cincinnati and Mitsubishi is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Mitsubishi Gas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Gas Chemical 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 Mitsubishi Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Gas Chemical has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Mitsubishi Gas go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Mitsubishi Gas

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to under-perform the Mitsubishi Gas. In addition to that, Cincinnati Financial is 1.33 times more volatile than Mitsubishi Gas Chemical. It trades about -0.25 of its total potential returns per unit of risk. Mitsubishi Gas Chemical is currently generating about -0.03 per unit of volatility. If you would invest  1,720  in Mitsubishi Gas Chemical on October 26, 2024 and sell it today you would lose (10.00) from holding Mitsubishi Gas Chemical or give up 0.58% of portfolio value over 90 days.

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

Cincinnati Financial Corp  vs.  Mitsubishi Gas Chemical

Cincinnati Financial Corp

Risk-Adjusted Performance

0 of 100

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.

Mitsubishi Gas Chemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Gas Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mitsubishi Gas may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cincinnati Financial and Mitsubishi Gas

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

The idea behind Cincinnati Financial Corp and Mitsubishi Gas Chemical 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.