Correlation Between Cincinnati Financial and Kinsale Capital

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

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

Diversification Opportunities for Cincinnati Financial and Kinsale Capital

0.74

Correlation Coefficient

Cincinnati Financial  Kinsale Capital

Poor diversification

The 3 months correlation between Cincinnati and Kinsale is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Kinsale Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinsale Capital Group 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 Kinsale Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinsale Capital Group has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Kinsale Capital go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Kinsale Capital

Given the investment horizon of 90 days Cincinnati Financial is expected to generate 0.68 times more return on investment than Kinsale Capital. However, Cincinnati Financial is 1.46 times less risky than Kinsale Capital. It trades about -0.13 of its potential returns per unit of risk. Kinsale Capital Group is currently generating about -0.12 per unit of risk. If you would invest  15,892  in Cincinnati Financial on November 29, 2024 and sell it today you would lose (1,874) from holding Cincinnati Financial or give up 11.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Cincinnati Financial  vs.  Kinsale Capital Group

Cincinnati Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cincinnati Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Kinsale Capital Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinsale Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Cincinnati Financial and Kinsale Capital

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

The idea behind Cincinnati Financial and Kinsale Capital Group 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.