Correlation Between Cincinnati Financial and Kingsway Financial

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

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

Diversification Opportunities for Cincinnati Financial and Kingsway Financial

0.18

Correlation Coefficient

Cincinnati Financial  Kingsway Financial

Average diversification

The 3 months correlation between Cincinnati and Kingsway is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Kingsway Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsway Financial 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 Kingsway Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsway Financial has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Kingsway Financial go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Kingsway Financial

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 0.87 times more return on investment than Kingsway Financial. However, Cincinnati Financial is 1.15 times less risky than Kingsway Financial. It trades about 0.03 of its potential returns per unit of risk. Kingsway Financial Services is currently generating about -0.1 per unit of risk. If you would invest  14,290  in Cincinnati Financial on December 21, 2024 and sell it today you would earn a total of  346.00  from holding Cincinnati Financial or generate 2.42% return on investment over 90 days.

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

Cincinnati Financial  vs.  Kingsway Financial Services

Cincinnati Financial

Risk-Adjusted Performance

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.

Kingsway Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingsway Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Cincinnati Financial and Kingsway Financial

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

The idea behind Cincinnati Financial and Kingsway Financial Services 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.