Correlation Between Cincinnati Financial and Wyndham

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

By analyzing existing cross correlation between Cincinnati Financial and Wyndham Destinations 4625, you can compare the effects of market volatilities on Cincinnati Financial and Wyndham 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 Wyndham. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Wyndham.

Diversification Opportunities for Cincinnati Financial and Wyndham

0.1

Correlation Coefficient

Cincinnati Financial  Wyndham

Average diversification

The 3 months correlation between Cincinnati and Wyndham is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and Wyndham Destinations 4625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wyndham Destinations 4625 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 Wyndham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wyndham Destinations 4625 has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Wyndham go up and down completely randomly.

Pair Corralation between Cincinnati Financial and Wyndham

Given the investment horizon of 90 days Cincinnati Financial is expected to under-perform the Wyndham. In addition to that, Cincinnati Financial is 2.87 times more volatile than Wyndham Destinations 4625. It trades about -0.12 of its total potential returns per unit of risk. Wyndham Destinations 4625 is currently generating about -0.07 per unit of volatility. If you would invest  9,378  in Wyndham Destinations 4625 on October 10, 2024 and sell it today you would lose (78.00) from holding Wyndham Destinations 4625 or give up 0.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Cincinnati Financial  vs.  Wyndham Destinations 4625

Cincinnati Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cincinnati Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Cincinnati Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wyndham Destinations 4625

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wyndham Destinations 4625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Wyndham is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cincinnati Financial and Wyndham

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

The idea behind Cincinnati Financial and Wyndham Destinations 4625 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.