Correlation Between Cincinnati Financial and Air Lease

Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Air Lease 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 Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cincinnati Financial and Air Lease, you can compare the effects of market volatilities on Cincinnati Financial and Air Lease 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 Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Air Lease.

Diversification Opportunities for Cincinnati Financial and Air Lease

0.95

Correlation Coefficient

Cincinnati Financial  Air Lease

Almost no diversification

The 3 months correlation between Cincinnati and Air is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Air Lease go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Air Lease

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 0.8 times more return on investment than Air Lease. However, Cincinnati Financial is 1.26 times less risky than Air Lease. It trades about 0.08 of its potential returns per unit of risk. Air Lease is currently generating about 0.05 per unit of risk. If you would invest  14,955  in Cincinnati Financial on September 15, 2024 and sell it today you would earn a total of  267.00  from holding Cincinnati Financial or generate 1.79% 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  vs.  Air Lease

Cincinnati Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Air Lease

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cincinnati Financial and Air Lease

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

The idea behind Cincinnati Financial and Air Lease 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.