Correlation Between Cincinnati Financial and Sysco

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

Diversification Opportunities for Cincinnati Financial and Sysco

0.77

Correlation Coefficient

Cincinnati Financial  Sysco

Poor diversification

The 3 months correlation between Cincinnati and Sysco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Sysco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sysco 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 Sysco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sysco has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Sysco go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Sysco

Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to generate 1.11 times more return on investment than Sysco. However, Cincinnati Financial is 1.11 times more volatile than Sysco. It trades about 0.06 of its potential returns per unit of risk. Sysco is currently generating about 0.01 per unit of risk. If you would invest  9,464  in Cincinnati Financial Corp on October 4, 2024 and sell it today you would earn a total of  4,406  from holding Cincinnati Financial Corp or generate 46.56% return on investment over 90 days.

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

Cincinnati Financial Corp  vs.  Sysco

Cincinnati Financial Corp

Risk-Adjusted Performance

8 of 100

OK

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

Sysco

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sysco are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sysco may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cincinnati Financial and Sysco

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

The idea behind Cincinnati Financial Corp and Sysco 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.