Correlation Between Cincinnati Financial and ARK Venture

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

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

Diversification Opportunities for Cincinnati Financial and ARK Venture

-0.48

Correlation Coefficient

Cincinnati Financial  ARK Venture

Very good diversification

The 3 months correlation between Cincinnati and ARK is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and ARK Venture Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Venture Fund 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 ARK Venture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Venture Fund has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and ARK Venture go up and down completely randomly.

Pair Corralation between Cincinnati Financial and ARK Venture

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.78 times more return on investment than ARK Venture. However, Cincinnati Financial is 1.78 times more volatile than ARK Venture Fund. It trades about 0.03 of its potential returns per unit of risk. ARK Venture Fund is currently generating about 0.03 per unit of risk. If you would invest  14,228  in Cincinnati Financial on December 28, 2024 and sell it today you would earn a total of  327.00  from holding Cincinnati Financial or generate 2.3% return on investment over 90 days.

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

Cincinnati Financial  vs.  ARK Venture Fund

Cincinnati Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Cincinnati Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ARK Venture Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Venture Fund are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, ARK Venture is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cincinnati Financial and ARK Venture

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

The idea behind Cincinnati Financial and ARK Venture Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.