Correlation Between Cincinnati Financial and AerCap Holdings

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

Diversification Opportunities for Cincinnati Financial and AerCap Holdings

-0.16

Correlation Coefficient

Cincinnati Financial  AerCap Holdings

Good diversification

The 3 months correlation between Cincinnati and AerCap is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV 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 AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and AerCap Holdings go up and down completely randomly.

Pair Corralation between Cincinnati Financial and AerCap Holdings

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to under-perform the AerCap Holdings. In addition to that, Cincinnati Financial is 1.04 times more volatile than AerCap Holdings NV. It trades about -0.03 of its total potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.04 per unit of volatility. If you would invest  9,123  in AerCap Holdings NV on December 23, 2024 and sell it today you would earn a total of  289.00  from holding AerCap Holdings NV or generate 3.17% return on investment over 90 days.

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

Cincinnati Financial Corp  vs.  AerCap Holdings NV

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.

AerCap Holdings NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AerCap Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cincinnati Financial and AerCap Holdings

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

The idea behind Cincinnati Financial Corp and AerCap Holdings NV 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.