Correlation Between Cincinnati Financial and TPT Strategic

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

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

Diversification Opportunities for Cincinnati Financial and TPT Strategic

-0.52

Correlation Coefficient

Cincinnati Financial  TPT Strategic

Excellent diversification

The 3 months correlation between Cincinnati and TPT is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and TPT Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPT Strategic 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 TPT Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPT Strategic has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and TPT Strategic go up and down completely randomly.

Pair Corralation between Cincinnati Financial and TPT Strategic

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 95.25 times less return on investment than TPT Strategic. But when comparing it to its historical volatility, Cincinnati Financial is 16.76 times less risky than TPT Strategic. It trades about 0.03 of its potential returns per unit of risk. TPT Strategic is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  350.00  in TPT Strategic on October 24, 2024 and sell it today you would earn a total of  550.00  from holding TPT Strategic or generate 157.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Cincinnati Financial  vs.  TPT Strategic

Cincinnati Financial

Risk-Adjusted Performance

2 of 100

Weak

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.

TPT Strategic

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TPT Strategic are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, TPT Strategic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cincinnati Financial and TPT Strategic

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

The idea behind Cincinnati Financial and TPT Strategic 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.