Correlation Between Cincinnati Financial and Big Tree

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

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

Diversification Opportunities for Cincinnati Financial and Big Tree

-0.11

Correlation Coefficient

Cincinnati Financial  Big Tree

Good diversification

The 3 months correlation between Cincinnati and Big is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Big Tree Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Tree Cloud 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 Big Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Tree Cloud has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Big Tree go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Big Tree

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 0.16 times more return on investment than Big Tree. However, Cincinnati Financial is 6.41 times less risky than Big Tree. It trades about 0.05 of its potential returns per unit of risk. Big Tree Cloud is currently generating about -0.13 per unit of risk. If you would invest  14,228  in Cincinnati Financial on December 29, 2024 and sell it today you would earn a total of  526.00  from holding Cincinnati Financial or generate 3.7% return on investment over 90 days.

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

Cincinnati Financial  vs.  Big Tree Cloud

Cincinnati Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 3 (%) 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.

Big Tree Cloud

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big Tree Cloud has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Cincinnati Financial and Big Tree

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

The idea behind Cincinnati Financial and Big Tree Cloud 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.