Correlation Between Cincinnati Financial and STRAYER EDUCATION

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

Diversification Opportunities for Cincinnati Financial and STRAYER EDUCATION

0.9

Correlation Coefficient

Cincinnati Financial  STRAYER EDUCATION

Almost no diversification

The 3 months correlation between Cincinnati and STRAYER is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and STRAYER EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAYER EDUCATION 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 STRAYER EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAYER EDUCATION has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and STRAYER EDUCATION go up and down completely randomly.

Pair Corralation between Cincinnati Financial and STRAYER EDUCATION

Assuming the 90 days trading horizon Cincinnati Financial is expected to generate 1.13 times less return on investment than STRAYER EDUCATION. But when comparing it to its historical volatility, Cincinnati Financial Corp is 1.05 times less risky than STRAYER EDUCATION. It trades about 0.13 of its potential returns per unit of risk. STRAYER EDUCATION is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,750  in STRAYER EDUCATION on October 8, 2024 and sell it today you would earn a total of  1,150  from holding STRAYER EDUCATION or generate 14.84% return on investment over 90 days.

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

Cincinnati Financial Corp  vs.  STRAYER EDUCATION

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.

STRAYER EDUCATION

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STRAYER EDUCATION are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, STRAYER EDUCATION exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cincinnati Financial and STRAYER EDUCATION

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

The idea behind Cincinnati Financial Corp and STRAYER EDUCATION 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.