Correlation Between Cincinnati Financial and Live Ventures

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

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

Diversification Opportunities for Cincinnati Financial and Live Ventures

-0.69

Correlation Coefficient

Cincinnati Financial  Live Ventures

Excellent diversification

The 3 months correlation between Cincinnati and Live is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Live Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Ventures 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 Live Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Ventures has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Live Ventures go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Live Ventures

Given the investment horizon of 90 days Cincinnati Financial is expected to under-perform the Live Ventures. But the stock apears to be less risky and, when comparing its historical volatility, Cincinnati Financial is 2.98 times less risky than Live Ventures. The stock trades about -0.3 of its potential returns per unit of risk. The Live Ventures is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,009  in Live Ventures on October 1, 2024 and sell it today you would lose (19.00) from holding Live Ventures or give up 1.88% of portfolio value over 90 days.

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

Cincinnati Financial  vs.  Live Ventures

Cincinnati Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 4 (%) 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.

Live Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Live Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cincinnati Financial and Live Ventures

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

The idea behind Cincinnati Financial and Live Ventures 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.